annual report 2000 - cntaiping · ng yu lam kenneth registered office 12/f, ming an plaza phase ii...

�ANNUAL REPORT 2000

CONTENTS

Page

Corporate Information 2

Corporate Structure 4

Chairman’s Statement 5

Management Review and Analysis 9

Biographical Details of Directors and Company Secretary 12

Report of the Directors 15

Report of the Auditors 25

Combined Profit and Loss Account 27

Revenue Account of Non-life Non-proportional Business 29

Revenue Account of Non-life Proportional Business 30

Revenue Account of Life Business 31

Combined Balance Sheet 32

Balance Sheet 33

Combined Cash Flow Statement 34

Notes on the Accounts 36

Four Year Financial Summary 80

Unaudited Supplementary Financial Information 82

Notice of the Annual General Meeting 85

� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

CORPORATE INFORMATION

DIRECTORS

Executive Directors

Yang Chao, Chairman

Zhang Xiaoshu, Vice Chairman

Miao Jianmin, Chief Executive Officer

Ng Yu Lam Kenneth, Deputy Chief Executive Officer

Dong Ming, Deputy Chief Executive Officer

Lau Siu Mun Sammy

Non-Executive Directors

Zheng Changyong

Wu Jiesi*

Lau Wai Kit*

* Independent

FINANCIAL CONTROLLER ANDCOMPANY SECRETARY

Tam Chiu Tai Richard

AUTHORISED REPRESENTATIVES

Miao Jianmin

Ng Yu Lam Kenneth

REGISTERED OFFICE

12/F, Ming An Plaza Phase II

8 Sunning Road

Causeway Bay

Hong Kong

Telephone: (852) 2864 1999

Facsimile: (852) 2866 2262

e-mail: [email protected]


CORPORATE INFORMATION

REGISTRAR AND TRANSFER OFFICE

HKSCC Registrars Limited

2/F, Vicwood Plaza

199 Des Voeux Road

Central

Hong Kong

AUDITORS

KPMG

Certified Public Accountants

8/F, Prince’s Building

10 Chater Road

Central

Hong Kong

PRINCIPAL BANKERS

Hang Seng Bank Limited

The China State Bank, Limited, Hong Kong Branch

Citibank, N.A., Hong Kong

Citibank, N.A., London

WEBSITE

www.ciih.com

STOCK MARKET LISTING

The Mainboard of The Stock Exchange of Hong Kong Limited (Stock Code : 966)

� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

CORPORATE STRUCTURE

China Insurance H�K�(Holdings) Company Limited

China Insurance Company� Limited

(The People’sRepublic of China)

The Ming AnInsurance Company

(Hong Kong)� LimitedThe Public

SINO+REReinsurance Brokers Limited

China InternationalReinsurance Company Limited

100%

52.94%

100% 100%

37.80%

100%

9.26%

China Insurance International Holdings Company Limited

/ANNUAL REPORT 2000

CHAIRMAN’S STATEMENT

2000 is a very important year for China Insurance

International Holdings Company Limited (the

“Company ” or “CIIH ” ) and i ts subsidiar ies

(collectively the “Group”). The Company was

incorporated in Hong Kong with limited liability on

18 February 2000 and through a reorganisation

scheme became the holding company of the Group

on 26 May 2000. The Group has been treated as a

continuing entity and accordingly the combined

accounts have been prepared on the basis that the

Company was the holding company of the Group

for both years presented rather than from 26 May

2000.

It gives me great pleasure to announce the first

annual result of the Group since our Company’s

listing on the Mainboard of The Stock Exchange of

Hong Kong Limited (“The Stock Exchange”) (Stock

Code: 966) on 29 June 2000. Our first year as a listed company was productive and fruitful. I am

very pleased with the performance of the Group and of our dedicated staff.

FINANCIAL RESULTS

For the year ended 31 December 2000, the Group’s turnover increased by 7.3% to HK$691.0

million compared to 1999 (1999: HK$644.3 million). The turnover composed of HK$683.4 million

(1999: HK$640.1 million) in reinsurance premium and HK$7.6 million (1999: HK$4.2 million) in

brokerage income.

Net profit attributable to shareholders was HK$117.7 million, an increase of 15.5% when compared

with that of the previous year. Meanwhile, earnings per share were HK15 cents, the same level as

the previous year.

The Group has maintained a strong financial position throughout the year, with cash and deposits

at bank amounting to approximately HK$457.5 million as at 31 December 2000, which enables

the Group flexibility to invest at the right time when investment opportunity arises.

Mr. Yang Chao Chairman

0 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED


DIVIDENDS

The directors have recommended the payment of a final dividend of HK4 cents per share for the

year ended 31 December 2000.

USE OF NET PROCEEDS FROM ISSUE OF SHARES

The net proceeds from the share offering after deducting expenses amounted to approximately

HK$294.9 million. It has been used for the following purposes:

a. HK$184.0 million has been used to increase the paid-up capital of China International

Reinsurance Company Limited (“CIRe”) and SINO-RE Reinsurance Brokers Limited

(“SINO-RE”) respectively. (HK$180.0 million in CIRe and HK$4.0 million in SINO-RE).

b. The rest of the proceeds have been kept to increase the working funds of the Company and

to acquire high quality bonds to produce steady interest income.

2001 PROSPECT

After a period of weak market conditions due to excessive supply of reinsurance capacity, the

reinsurance market eventually turned around at 1 January 2001 with rate increases and restrictions

in coverage being broadly applied in treaty renewals. Reinsurance business will also benefit from

the increasing rates in the Non-life direct insurance market. Assuming that there is no unusual

claims, the underwriting result and underwriting cash flow are expected to improve. In line with

reinsurance underwriting, the revenue from the reinsurance brokerage is also anticipated to grow

satisfactorily. The Company is optimistic with the prospect of its core reinsurance businesses.

Looking north of the border, with the services of the newly formed CIIH’s Shanghai Representative

Office and more marketing activities devoted to the China market, the Company has good reasons

to anticipate a healthy growth of its core business from the emerging China market.

The United States of America is facing a possible economic slow-down that has caused adverse

effects on the recent performance of the major stock markets. 2001 will be a year of great challenge

for the Company to achieve results better than market performance in investment. In 2001, the

Company will continue its prudent investment philosophy as in the past with strong emphasis on

quality bond and cash holdings, to be supplemented by a suitable portion of equity investments.

As a large portion of the investment portfolio is vested in bonds that are intended for long-term

holding till maturity, the Company enjoys steady investment income despite the recent unsteady

global economic outlook. The improvement in cash flow position from underwriting will also partly

offset the reduction in interest income due to the falling interest rates. As far as investment income

is concerned, the Group expects another healthy year.

1ANNUAL REPORT 2000


2001 PROSPECT (Continued)

Expansion in the Chinese domestic insurance market is the Company’s major strategic goal.

Based on the progresses made in 2000, it is expected that the Company will make significant

steps towards its Chinese expansion plan this year. The Shanghai Representative Office will

facilitate the Company in widening its business contacts in Mainland China.

The Company has an ambitious China expansion plan that is in line with its parent company,

China Insurance H.K. (Holdings) Company Limited (“CIHK” or the “China Insurance Group”). As

committed by the parent company at the time of the Initial Public Offering, the China Insurance

Group will fully support the Company in its business expansion especially in the Chinese domestic

insurance market. It is encouraging that The Tai Ping Life Insurance Company Limited and The Tai

Ping Insurance Company Limited, subsidiaries of the China Insurance Group, have been approved

to resume insurance underwriting in the mainland China in the fields of life and general insurance

respectively. The Company will be actively involved in the parent company’s domestic insurance

expansion plans and will benefit therefrom. Furthermore, the parent company has rationalised

the asset management of its subsidiaries, which will enable future injection of quality assets into

the Company.

The Company, like its parent company, the China Insurance Group, has accumulated valuable

experience, management skills and a team of quality staff through its experience in the overseas

markets. Besides insights and prowess in the international insurance and capital markets, it also

understands well the Chinese domestic insurance market. The huge potential of the Chinese

domestic insurance market attracts attention from many international insurers and investors and

will continue to be an investment focus after China becomes a member of the World Trade

Organization. Along with the expansion of the China Insurance Group, the Company will maximise

its unique advantageous position in the China insurance market in the near future. It is anticipated

that our Chinese domestic business will include life insurance, general insurance, asset

management and insurance brokerage. The weighting from these business streams will gradually

increase and eventually they will become the core business of the Company. With strong support

from the China Insurance Group, the Company will endeavour to develop towards this goal, bearing

a clear objective of profit consciousness, which is the common desire and expectation of the

shareholders.



APPRECIATION

On behalf of the board of directors, I would like to express my gratitude to our clients, management

team and staff for their valuable support. Last but not least, I would like to bid welcome to our new

shareholders and thank them for their support. We will continue to plan well and work hard to build

value for your investment.

Yang Chao

Chairman

Hong Kong, 9 April 2001

Opening ceremony of Shanghai Representative Office of CIIH on 28 February 2001.


MANAGEMENT REVIEW AND ANALYSIS

FINANCIAL RESULTS

The Company is pleased to announce that the audited profit attributed to shareholders of the

Group for the year ended 31 December 2000 was HK$117.7 million, an increase of 15.5% when

compared with that of the previous year. Earnings per share were HK15 cents, the same level as

the previous year.

The directors have recommended the payment of a final dividend of HK4 cents ordinary share for

the year ended 31 December 2000.

The turnover of the Group reached HK$691.0 million representing an increase of 7.3% as compared

with that of the previous year. The turnover composed of HK$683.4 million (1999: HK$640.1 million)

in reinsurance premium and HK$7.6 million (1999: HK$4.2 million) in brokerage income.

OPERATION REVIEW

Reinsurance Underwriting

CIRe registered an increase of its gross premium incomes on Non-life Non-proportional and Non-

life Proportional reinsurance business by 20.9% and 3.2% respectively over that of the previous

year. CIRe also recorded an increase of 37.7% on its Life premium income over the previous year.

The increase of booked premium income in the year 2000 reversed the trend of premium reduction

since 1995.

CIRe ranked second among Hong Kong based professional reinsurance companies on local

reinsurance business and is also one of the important market-force in Asia. During 2000, 42.0%

of the annual premium came from Hong Kong and Macau, 8.6% from the People’s Republic of

China (“PRC”) (other than Hong Kong and Macau), 8.4% from Japan and 21.0% from the rest of

Asia. The remaining 20.0% of the premium was derived from Europe, North America and other

countries.

In the Non-life reinsurance business, where the three-year fund accounting policy was adopted, it

reflected an underwriting profit of HK$73.0 million (1999: underwriting deficit HK$47.0 million).

The improved result of the Non-life reinsurance mainly came from savings in claim settlement for

1997 and prior years. In the Life reinsurance business, where the annual accounting policy was

adopted, it produced an underwriting profit of HK$213,472 (1999: HK$975,812).

�� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED


OPERATION REVIEW (Continued)

Reinsurance Brokerage business

The brokerage income of SINO-RE registered an impressive increase of 81.5% to HK$7.6 million

compared to the previous year (1999: HK$4.2 million). The increase in brokerage income was due

to the increases in reinsurance orders in addition to price increases.

LIQUIDITY AND FINANCIAL RESOURCES

The group’s cash and bank deposits as at 31 December 2000 amounted to approximately HK$457.5

million, which was 42.8% increase over the previous year. The liquid cash enables the Group

flexibility to invest at the right time when investment opportunity arises. For the year ended 31

December 2000, the Group had no outstanding borrowings. The Group has sufficient working

capital to satisfy the present requirement of its core reinsurance business.

INVESTMENT PORTFOLIO AND INVESTMENT INCOME

The total investment portfolio held as at 31 December 2000, amounted to HK$1,775.2 million,

composed of HK$933.9 million (52.6%) in bonds and fixed income securities, HK$457.5 million

(25.8%) in cash and bank deposits, HK$183.1 million (10.3%) in listed equities, HK$122.9 million

(6.9%) in investment properties, HK$44.7 million (2.5%) in loan, HK$23.5 million (1.3%) in listed

unit trust and mutual funds and HK$9.6 million (0.6%) in unlisted equities. The investment portfolio

represented 84.4% of the total assets of the Group.

During the year, investment income, which consisted of dividend, interest income from listed and

unlisted securities, rental income and other interest income, amounted to HK$87.5 million,

representing an increase of 8.9% over that of the previous year. (1999: HK$80.4 million).

Other income resulted in net loss of HK$16.5 million (1999: net income HK$75.3 million). The

main reason for the reduction was due to net realised and unrealised losses on listed securities

amounting to HK$25.8 million; whereas there was a net realised and unrealised gain of HK$62.3

million in the previous year.

��ANNUAL REPORT 2000


INVESTMENT PORTFOLIO AND INVESTMENT INCOME (Continued)

The total investment and other incomes during the year amounted to approximately HK$71.1

million which was not as good as HK$155.7 million of the previous year. The drop in investment

income was mainly attributed to the net realised and unrealised losses on listed and unlisted

securities.

During the year, there was general weakening of foreign currencies against US dollars and Hong

Kong dollars. The Company booked net losses of HK$14.9 million (1999: HK$2.3 million) arising

from translation of the foreign currencies denominated assets and liabilities into Hong Kong dollars.

It is the Company’s policy to maintain adequate foreign currencies denominated assets to match

with corresponding liabilities.

BIOGRAPHICAL DETAILS OFDIRECTORS AND COMPANY SECRETARY


EXECUTIVE DIRECTORS

Mr. Yang Chao, aged 51, is the Chairman of the Company and joined the Company in March

2000. He is responsible for its overall business and strategy. He is also the Chairman and President

of China Insurance Company, Limited (“China Insurance (PRC)”) and CIHK. From 1976 to 1979,

Mr. Yang worked in The Bank of China, Shanghai Branch. In 1980 he joined the People's Insurance

Company of China (“PICC”) and later became a Director of PICC and the General Manager of its

Business Department. From 1996, Mr. Yang has been the Chairman and General Manager of CIC

Holdings Limited. CIC Holdings Limited is a company incorporated in the United Kingdom

responsible for overseeing the interests of China Insurance (PRC) in Europe. Mr. Yang has over

20 years experience in banking and insurance.

Mr. Zhang Xiaoshu, aged 57, is the Vice Chairman of the Company and joined the Company in

March 2000. He is responsible for assisting the Chairman and supervising the implementation of

the Company’s business strategy. Mr. Zhang was born in Shanghai where he worked until 1992

when he became the Executive Director and Vice President of China Travel Service (Holdings)

Hong Kong Limited and the General Manager of China Travel Service (Hong Kong) Limited.

Mr. Zhang joined CIHK in 1997 as a Director and the Vice President. Mr. Zhang is also the Chairman

of CIG-WH International (Holdings) Limited and a Director of each of CIRe, New Century Securities

Limited, Toplap Investments Limited and China Insurance Group Assets Management Limited.

Mr. Miao Jianmin, aged 36, is the Chief Executive Officer of the Company and joined the Company

in March 2000. He is responsible for the implementation of the Company’s strategy. Mr. Miao

graduated with a Masters degree in Economics from the Postgraduate School of the People's

Bank of China. Mr. Miao joined PICC in 1989 and was the Deputy Manager of the International

Department of PICC from 1989 to 1995. He was the Deputy General Manager of CIRe from 1995

to 1997. Since September 1997, he was the Deputy General Manager of the Investment Department

of CIHK. Since August 1999, Mr. Miao has been a Director of China Insurance Company, Limited;

and the Director and Assistant President of CIHK. Mr. Miao is also a Director of CIRe. Since

January 2001, he becomes the Director and Chief Executive Officer of China Insurance Group

Assets Management Limited.



EXECUTIVE DIRECTORS (Continued)

Mr. Ng Yu Lam Kenneth, aged 52, is the Deputy Chief Executive Officer of the Company and

joined the Company in March 2000. He is responsible for the investment and underwriting activities

of the Company. Mr. Ng is also a member of the Investment Committee since 1995. Mr. Ng is a

Fellow of the Chartered Insurance Institute of the United Kingdom and has more than 30 years of

experience in the insurance industry. Mr. Ng joined The Ming An Insurance Company (Hong Kong),

Limited (“Ming An”) in 1968. From 1968 to 1980, he worked in the Marine Hull Department and in

the Reinsurance Department of Ming An. In December 1980, Mr. Ng joined CIRe as a Manager,

and has since held positions as Assistant General Manager and Deputy General Manager. Since

1996, Mr. Ng has been the General Manager of CIRe. Mr. Ng is also a Director of CIRe, SINO-RE,

CIHK and China America Insurance Company Limited. Mr. Ng is not involved in the day to day

management of these companies other than the Company, CIRe and SINO-RE.

Dr. Dong Ming, aged 44, joined the Company in April 2000 as a Deputy Chief Executive Officer of

the Company. Dr. Dong received a Doctorate degree from the London School of Economics and

Political Science in 1991. Prior to joining the Company, Dr. Dong was an Executive Director and

the Executive Deputy General Manager of Tianjin Development Holdings Limited, a company

listed on The Stock Exchange. Dr. Dong was responsible for assisting the President and the General

Manager in handling the overall business and strategy of Tianjin Development Holdings Limited

and for its investment and finance. He was also responsible for the development and maintenance

of the relationship with shareholders and public investors of Tianjin Development Holdings Limited.

Prior to joining Tianjin Development Holdings Limited in March 1998, Dr. Dong was a Director of

the Corporate Finance Division of Merrill Lynch (Asia Pacific) Limited, responsible for China

corporate finance marketing, focusing on equity and debt underwriting, for participating and

coordinating execution and advising corporate clients to identify and pursue business opportunities.

Dr. Dong has substantial corporate finance, investment management and administrative experience

both in Hong Kong and the PRC capital markets. He is also a director of China Insurance Group

Assets Management Limited.

Mr. Lau Siu Mun Sammy, aged 43, joined the Company in March 2000. He is responsible for the

underwriting activities of the Company. Mr. Lau obtained a Bachelor of Business Administration

degree from the Chinese University of Hong Kong in 1981. Mr. Lau is a Fellow of the Chartered

Insurance Institute of the United Kingdom. Mr. Lau joined CIRe in July 1981. He was the Sub-

manager, Manager of the Treaty Reinsurance Department, Assistant General Manager and Deputy

General Manager of CIRe. Mr. Lau is also an Executive Director of SINO-RE.



NON-EXECUTIVE DIRECTORS

Mr. Zheng Changyong, aged 36, joined the Company in March 2000. Mr. Zheng joined CIHK in

August 1997 and is currently the General Manager of the Finance and Accounts Department of

CIHK. Mr. Zheng graduated from the University of Industry and Commerce of Beijing with a Masters

degree in Economics. He has over 10 years experience in the insurance and accounting field.

Dr. Wu Jiesi, aged 49, holds a Doctorate degree in Economics and was President of the Industrial

and Commercial Bank of China, Shenzhen from 1992 to 1995, Deputy Mayor of Shenzhen Municipal

Government (responsible for finance, tax revenue, securities, banking and education) from 1995

to 1998 and Assistant to the Governor of Guangdong Province from 1998 to February 2000, then

he became the Chairman of Guangdong Enterprises (Holdings) Limited. He is also the Chairman

of GDH Limited (“GDH”) and a director and the Honorary President of Guangdong Investment

Limited, a subsidiary of GDH.

Mr. Lau Wai Kit, aged 38, holds a Bachelor of Law degree and a Postgraduate Certificate in Law

from the University of Hong Kong. Mr. Lau has over twelve years of experience in practising law

and is a solicitor of the High Court of Hong Kong, an attorney and counselor at law of the Supreme

Court of the State of California, a solicitor of the Supreme Court of England and Wales, and an

advocate and solicitor of the Supreme Court of Singapore. Mr. Lau is currently the Chief Financial

Officer of Asia2B.com Limited and an Independent Non-executive Director of Tianjin Development

Holdings Limited. He also sits on the Innovation and Technology Fund (Biotechnology Projects)

Vetting Committee and the Small Entrepreneur Research Assistance Programme Project

Assessment Panel of the Hong Kong Government.

COMPANY SECRETARY

Mr. Tam Chiu Tai Richard, aged 47, is the Company Secretary and Financial Controller of the

Company. Mr. Tam graduated from the Asia International Open University (Macau) in 1993 with a

Masters degree in Business Administration. Mr. Tam is a Fellow of The Association of Chartered

Certified Accountants of the United Kingdom and an Associate of the Hong Kong Society of

Accountants. He is also a member of the British Institute of Management. Mr. Tam has been a

Senior Manager of Toplap Investments Limited. Prior to April 1996, Mr. Tam was the Financial

Controller of Hopewell Power (China) Limited for over six years.

�/ANNUAL REPORT 2000

REPORT OF THE DIRECTORS

The directors have pleasure in submitting their annual report together with the audited accounts

for the year ended 31 December 2000.

GROUP REORGANISATION

The Company was incorporated in Hong Kong with limited liability on 18 February 2000 under the

Hong Kong Companies Ordinance. Pursuant to a reorganisation scheme to rationalise the Group

structure in preparation for the listing of the shares of the Company on The Stock Exchange, the

Company became the holding company of the Group on 26 May 2000. Details of the Group

reorganisation are set out in note 1(b) to the accounts. The Group has been treated as a continuing

entity and accordingly, the accompanying combined accounts have been presented on the basis

set out in note 1(b) to the accounts.

On 29 June 2000, the dealing in shares of the Company commenced on The Stock Exchange.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of the Group

are the underwriting of treaty and facultative reinsurance of all classes of general business, including

non-marine and marine, and certain classes of long term business. The Group also carries on

reinsurance broking and, to support its reinsurance activities, holds security, investments in money

market and property investments. An analysis of the turnover and contribution to profit before

taxation of the Group by principal activities and geographical area of operations for the year

ended 31 December 2000 is as follows:

Contribution

Group to profit from

turnover operations

HK$ HK$

By principal activities:

Reinsurance business 683,452,557 73,180,019

Brokerage business 7,591,722 5,764,649

691,044,279 78,944,668

Other group income, net of other expenses 39,869,823

118,814,491

�0 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED


PRINCIPAL ACTIVITIES (Continued)

Group

turnover

HK$

By geographical locations of operations

Hong Kong and Macau 290,516,522

PRC (other than Hong Kong and Macau) 60,570,473

Japan 57,607,210

Rest of Asia 143,389,321

Sub-total for Asia 552,083,526

Europe 98,926,310

North America 20,007,215

South America 14,056,142

Australia 4,204,777

Africa 1,766,309

691,044,279

MAJOR CEDANTS AND RETROCESSIONAIRES

The information in respect of the Group’s gross premiums written and outward retrocession

premiums attributable to the major cedants and retrocessionaires respectively during the financial

year is as follows:

Percentage of

the Group’s total

Gross Outward

premiums retrocession

written premiums

The largest cedant 7.1% —

Five largest cedant in aggregate 24.9% —

The largest retrocessionaire — 6.3%

Five largest retrocessionaires in aggregate — 24.8%

�1ANNUAL REPORT 2000


MAJOR CEDANTS AND RETROCESSIONAIRES (Continued)

The five largest cedants in aggregate included amounts ceded by certain related parties. The

aggregate amount ceded by them represent 16.3% of total gross premiums written. The directors

confirm that these cedants are under the common control of China Insurance Company, Limited

which is the ultimate holding company of the Company.

Apart from the above, at no time during the year have the directors, their associates or any

shareholder of the Company (which to the knowledge of the directors owns more than 5% of the

Company‘s share capital) has any interest in these major cedants and retrocessionaires.

ACCOUNTS

The profit of the Group for the year ended 31 December 2000 and the state of the Company’s and

the Group’s affairs at that date are set out in the accounts on pages 27 to 79.

The directors have recommended the payment of a final dividend of HK4 cents per ordinary share

in respect of the year ended 31 December 2000.

FIXED ASSETS

Details of the movements in fixed assets are set out in note 12 on the accounts.

SHARE CAPITAL

Details of the movements in share capital of the Company during the year are set out in note 25

on the accounts. Shares were issued during the year to broaden the capital base of the Company.

RESERVES

Details of movements in the reserves of the Company and the Group during the year are set out

in note 26 to the accounts.



DISTRIBUTABLE RESERVES

As at 31 December 2000, the Company’s reserves available for cash distribution and/or distribution

in specie amounted to HK$42.4 million. In addition, the Company’s share premium account of

HK$282.6 million as at 31 December 2000 may be distributed in the form of fully paid bonus

shares.

DIRECTORS

The directors during the financial year were:

Executive directors

Yang Chao (appointed on 23 March 2000)

Zhang Xiaoshu (appointed on 23 March 2000)

Miao Jianmin (appointed on 23 March 2000)

Ng Yu Lam Kenneth (appointed on 23 March 2000)

Dong Ming (appointed on 25 May 2000)

Lau Siu Mun Sammy (appointed on 23 March 2000)

Non-executive directors

Zheng Changyong (appointed on 23 March 2000)

Wu Jiesi * (appointed on 25 May 2000)

Lau Wai Kit * (appointed on 25 May 2000)

* Independent

In accordance with Articles 92, 96 to 100 of the Company’s Articles of Association, Messrs Dong

Ming, Zheng Changyong, Wu Jiesi and Lau Wai Kit retire from office and, being eligible, offer

themselves for re-election at the forthcoming Annual General Meeting.

The biographical details of directors and company secretary are set out in pages 12 to 14.



DIRECTORS’ SERVICE CONTRACTS

Messrs Yang Chao, Zhang Xiaoshu, Miao Jianmin, Ng Yu Lam Kenneth, Dong Ming and Lau Siu

Mun Sammy have entered into service contracts with the Company on 29 May 2000 for an initial

period of three years commencing from 1 April 2000. The respective contracts shall continue after

their respective initial period unless and until terminated by either party to such contracts by

giving three months’ written notice to the other party.

No director proposed for re-election at the forthcoming Annual General Meeting has an unexpired

service contract which is not determinable by the Company or any of its subsidiaries within one

year without payment of compensation, other than normal statutory obligations.

DIRECTORS’ INTERESTS IN SHARES

As at 31 December 2000, none of the directors or their associates had any personal, family,

corporate or other beneficial interests in the share capital of the Company or any of its associated

corporations (within the meaning of the Securities (Disclosure of Interests) Ordinance (the “SDI

Ordinance”)), which had been entered in the register kept by the Company pursuant to section 29

of the SDI Ordinance.

As at 31 December 2000, the directors and their associates of the Company had the following

personal interests in options to subscribe for shares of the Company (market value per share is

HK$1.14 at the balance sheet date) granted at nominal consideration under a share option scheme

of the Company as recorded in the register required under section 29 of the SDI Ordinance. Each

option gives the holder the right to subscribe for one share.



DIRECTORS’ INTERESTS IN SHARES (Continued)

No. of

shares Price Market

No. of acquired on per share value per

options exercise to be share at

outstanding Period during of options paid on date of

at the which options during exercise grant of

year end Date granted exercisable the year of options options

Yang Chao 3,000,000 26 September 2000 26 September 2000 — HK$1.11 HK$1.37

to 25 September 2010

Zhang Xiaoshu 2,500,000 28 September 2000 28 September 2000 — HK$1.11 HK$1.41


Miao Jianmin 2,000,000 26 September 2000 26 September 2000 — HK$1.11 HK$1.37


Ng Yu Lam 1,800,000 28 September 2000 28 September 2000 — HK$1.11 HK$1.41

Kenneth to 27 September 2010

Dong Ming 1,500,000 27 September 2000 27 September 2000 — HK$1.11 HK$1.40


Lau Siu Mun 1,500,000 27 September 2000 27 September 2000 — HK$1.11 HK$1.40

Sammy to 26 September 2010

Zheng Changyong 1,200,000 28 September 2000 28 September 2000 — HK$1.11 HK$1.41


No share options were exercised by the directors during the year.

Apart from the foregoing, at no time during the year was the Company, any of its holding company,

subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors of the

Company or any of their spouses or children under eighteen years of age to acquire benefits by

means of the acquisition of shares in or debentures of the Company or any other body corporate.



SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

As at 31 December 2000, according to the register maintained by the Company under section

16(1) of the SDI Ordinance, the shareholders who had or were deemed to have interest in 10% or

more of the ordinary shares in issue were as follow:

Percentage

Ordinary of total

shares held issued shares

China Insurance Company, Limited 555,872,000 62.2%

(note 1)

China Insurance H.K. (Holdings) Company Limited 555,872,000 62.2%

(note 2)

Notes:

1. China Insurance (PRC)’s beneficial interest in the Company is held by CIHK and The Ming An Insurance Company

(Hong Kong), Limited (“Ming An”), both of which are wholly-owned subsidiaries of China Insurance (PRC).

2. 82,794,000 shares are held by Ming An, a wholly-owned subsidiary of CIHK.

Save as disclosed above, there was no person known to the directors who at 31 December 2000 was directly or

indirectly interested in 10% or more of the ordinary shares in issue of the Company.

DIRECTORS’ INTEREST IN CONTRACTS

No contracts of significance to which the Company, any of its holding companies, subsidiaries or

fellow subsidiaries was a party in which a director of the Company had a material interest, whether

directly or indirectly, subsisted at the end of the year or at any time during the year.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the year ended 31 December 2000, other than the allotment and issue of shares in

connection with the Company’s Initial Public Offering, neither the Company nor any of its

subsidiaries has purchased, sold or redeemed any of the Company’s listed securities.



CONNECTED TRANSACTIONS

Details of connected transaction under Chapter 14 of the Rules Governing the Listing of Securities

on the Stock Exchange of Hong Kong Limited (“The Listing Rules”) are set out in note 30 on the

accounts. In the opinion of the independent non-executive directors, these transactions were

entered into by the Group:

(i) in the ordinary and usual course of its business;

(ii) on terms that are fair and reasonable so far as the shareholders of the Company are

concerned;

(iii) on normal commercial terms and either

(1) in accordance with the terms of the agreements governing such transactions; or

(2) if there is no such agreement, on terms no less favourable than terms available to third

parties; and

(iv) within the proposed limits as laid down by The Stock Exchange which are applicable to the

Company.

A letter dated 6 April 2001 was received from the auditors of the Company confirming that the

connected transactions of the Group received the approval of the Company’s board of directors

and have been conducted in the manner as stated in (iii) and (iv) stated above.

FOUR YEAR SUMMARY

A summary of the results and of the assets and liabilities of the Group for the last four financial

years is set out on pages 80 to 81 of the accounts.

PROPERTIES

Particulars of the Group’s properties held for own use and for investment purposes are set out in

note 12 on the accounts.



RETIREMENT SCHEMES

The Group operates a defined contribution staff provident fund scheme (“The Scheme”) for its

employees whereby the Group contributes to The Scheme at a rate ranging from 5.0% to 15.0%

of the monthly salary of the eligible employees. The applicable rate of contribution depends on the

completed years of service of the respective employees with the Group. The Group has no obligation

for the payment of retirement benefits beyond the contributions described above. For any forfeited

amount due to resignation prior to vesting of the benefits, the amount will be used to reduce the

contributions made in that corresponding financial year.

Contributions to The Scheme are charged to the profit and loss account as and when incurred.

Contributions amounted to HK$1.2 million for the year ended 31 December 2000 (1999: HK$1.2

million).

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s Articles of Association which

would oblige the Company to offer new shares on a pro rata basis to existing shareholders.

CODE OF BEST PRACTICE

No director of the Company is aware of any information which would reasonably indicate that the

Company is not, or was not, at any time since the Company’s shares were listed on The Stock

Exchange on 29 June 2000, in compliance with the Code of Best Practice as set out in Appendix

14 to the Listing Rules, except that the non-executive directors were not appointed for a specific

term, but are subject to retirement by rotation and re-election at the Company’s Annual General

Meeting in accordance with the Company’s Articles of Association.

AUDIT COMMITTEE

In accordance with paragraph 14 of the Code of Best Practice as set out in Appendix 14 to the

Listing Rules, the board of directors has established an audit committee on 29 May 2000 comprising

two independent non-executive directors and a non-executive director. The audit committee is

delegated with the responsibility of reviewing the Company’s financial reporting and internal control

systems.



USE OF PROCEEDS OF THE SHARE OFFER

On 28 July 2000, the Company used HK$184.0 million from the proceeds of the share offer to

increase the paid-up capital of CIRe and SINO-RE to HK$780.0 million and HK$5.0 million

respectively. The rest of the proceeds have been kept to increase the working fund of the Company

and to acquire high quality bonds to produce steady interest income.

OVER-ALLOTMENT OPTION

The Global Coordinator of the Company’s initial public offering exercised the over-allotment option

on 14 July 2000, which resulted in an additional issue of 44,580,000 ordinary shares of the Company

at HK$1.43 per share. The additional shares issued represented approximately 5.0% of the

Company’s enlarged issued share capital immediately after the share offer and the exercise of

the over-allotment option.

AUDITORS

KPMG were first appointed as auditors of the Company on 29 May 2000.

KPMG will retire and, being eligible, offer themselves for reappointment. A resolution for the

reappointment of KPMG as auditors of the Company is to be proposed at the forthcoming Annual

General Meeting.

By order of the board

Zhang Xiaoshu

Director



REPORT OF THE AUDITORS

Auditors’ report to the shareholders of

China Insurance International Holdings Company Limited

(Incorporated in Hong Kong with limited liability)

We have audited the accounts on pages 27 to 79 which have been prepared in accordance with

accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Hong Kong Companies Ordinance requires the directors to prepare accounts which give a

true and fair view. In preparing accounts which give a true and fair view it is fundamental that

appropriate accounting policies are selected and applied consistently, that judgements and

estimates are made which are prudent and reasonable and that the reasons for any significant

departure from applicable accounting standards are stated.

It is our responsibility to form an independent opinion, based on our audit, on those accounts and

to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong

Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant

to the amounts and disclosures in the accounts. It also includes an assessment of the significant

estimates and judgements made by the directors in the preparation of the accounts, and of whether

the accounting policies are appropriate to the Company’s and the Group’s circumstances,

consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which

we considered necessary in order to provide us with sufficient evidence to give reasonable

assurance as to whether the accounts are free from material misstatement. In forming our opinion

we also evaluated the overall adequacy of the presentation of information in the accounts. We

believe that our audit provides a reasonable basis for our opinion.


REPORT OF THE AUDITORS

OPINION

In our opinion, the accounts give a true and fair view of the state of affairs of the Company and of

the Group as at 31 December 2000 and of the Group’s profit and cash flows for the year then

ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance.

KPMG

Certified Public Accountants


COMBINED PROFITAND LOSS ACCOUNT

For the year ended 31 December 2000(Expressed in Hong Kong dollars)


Note 2000 1999$ $

Turnover 2 691,044,279 644,314,317

Reinsurance business

Amount transferred from/(to)revenue account

Non-life— Non-proportional 128,641,153 (58,005,878)— Proportional (55,674,606) 11,037,186

Life 213,472 975,812

73,180,019 (45,992,880)

Brokerage business 2 7,591,722 4,183,342

Other revenue 3 87,522,848 80,381,045

Other net (loss)/income 4 (16,451,914) 75,282,605

151,842,675 113,854,112-------------------- --------------------

Expenditure relating tonon-underwriting activities

Administrative expenses (18,110,374) (18,095,830)Net exchange losses (14,917,810) (2,289,034)Provision written back on diminution

in value of land and buildings — 11,716,046

(33,028,184) (8,668,818)-------------------- --------------------

Profit from ordinary activities beforetaxation 5 118,814,491 105,185,294

Taxation 6(a) (1,084,847) (3,292,000)

Profit attributable to shareholders 9 117,729,644 101,893,294

Dividends 10 — (126,823,127)

Retained profit/(loss) for the year 117,729,644 (24,929,833)

COMBINED PROFITAND LOSS ACCOUNTFor the year ended 31 December 2000(Expressed in Hong Kong dollars)


Note 2000 1999$ $

Earnings per share 11

Basic 15 cents 15 cents

Diluted 15 cents N/A

No separate combined statement of recognised gains and losses has been prepared as the netprofit for the year would be the only component of this statement.

The notes on pages 36 to 79 form part of these accounts.

REVENUE ACCOUNT OF NON-LIFENON-PROPORTIONAL BUSINESS



Note 2000 1999$ $

Gross premiums written 2 146,175,134 120,893,829

Outward retrocession premiums (35,596,570) (23,497,093)

Net written premiums 110,578,564 97,396,736-------------------- --------------------

Insurance funds brought forward 227,722,712 188,716,103-------------------- --------------------

Gross claims (112,551,682) (153,105,817)

Less: Reinsurers’ share of claims 71,785,673 48,157,423

Net claims (40,766,009) (104,948,394)-------------------- --------------------

Commission expenses (10,674,426) (8,827,126)-------------------- --------------------

Interest income on premium deposits 82,700 314,560-------------------- --------------------

Management expenses (3,249,010) (2,935,045)-------------------- --------------------

Insurance funds carried forward (155,053,378) (227,722,712)-------------------- --------------------

Amount transferred to/(from) profitand loss account 128,641,153 (58,005,878)


REVENUE ACCOUNT OF NON-L I F EPROPORTIONAL BUSINESSFor the year ended 31 December 2000(Expressed in Hong Kong dollars)


Note 2000 1999$ $


Outward retrocession premiums (111,401,538) (132,321,600)


Insurance funds brought forward 285,115,020 316,123,650-------------------- --------------------

Gross claims incurred (396,849,773) (340,642,763)

Less: Reinsurers’ share of claims 78,594,214 70,717,040

Net claims (318,255,559) (269,925,723)-------------------- --------------------

Commission income 43,180,219 49,819,348Commission expenses (177,375,248) (171,991,409)

Net commission (134,195,029) (122,172,061)-------------------- --------------------

Interest income on premium deposits 1,374,176 1,608,225-------------------- --------------------

Management expenses (11,828,636) (12,511,636)-------------------- --------------------

Insurance funds carried forward (298,410,100) (285,115,020)-------------------- --------------------

Amount transferred (from)/to profitand loss account (55,674,606) 11,037,186


REVENUE ACCOUNT OF LIFE BUSINESSFor the year ended 31 December 2000

(Expressed in Hong Kong dollars)


Note 2000 1999$ $


Outward retrocession premiums (473,282) (563,820)


Life assurance fund brought forward 1,196,457 1,460,107Life assurance fund carried forward (1,854,140) (1,196,457)

(Increase)/decrease in life assurancefund (657,683) 263,650

-------------------- --------------------

Net earned premiums 4,219,398 3,585,625-------------------- --------------------

Gross claims (3,641,093) (1,783,911)

Less: Reinsurers’ share of claims 580,865 —

Net claims (3,060,228) (1,783,911)-------------------- --------------------

Commission income 115,541 178,581Commission expenses (943,140) (910,144)

Net commission (827,599) (731,563)-------------------- --------------------

Interest income 934 —-------------------- --------------------

Management expenses (119,033) (94,339)-------------------- --------------------

Amount transferred to profitand loss account 213,472 975,812


COMBINED BALANCE SHEETAt 31 December 2000(Expressed in Hong Kong dollars)


Note 2000 1999$ $

Assets

Fixed assets— Investment properties 12 122,870,000 126,850,000— Other property, plant and equipment 12 65,261,677 65,919,485

188,131,677 192,769,485Investments in securities 14 1,150,092,525 1,043,082,886Amounts due from related parties 15 — 69,303,746Trade and other receivables 16 305,619,361 246,127,972Pledged deposits at bank 18 17,522,378 31,522,024Deposits at bank with original maturity

more than three months 467,421 15,476,737Cash and cash equivalents 19 439,552,566 273,520,050

2,101,385,928 1,871,802,900-------------------- --------------------

Liabilities

Insurance funds 20 453,463,478 512,837,732Life assurance fund 1,854,140 1,196,457Amount due to an immediate holding

company 15 4,000 —Amount due to a related party 15 7,632 —Provision for outstanding claims 21 633,199,338 686,148,474Trade and other payables 22 44,024,726 113,363,425Taxation 6(b) 13,223,762 10,950,253Deferred taxation 23 315,829 3,460,000

1,146,092,905 1,327,956,341-------------------- --------------------

Net assets 955,293,023 543,846,559

Capital and reserves

Share capital 25 44,687,400 601,000,000Reserves 26 910,605,623 (57,153,441)

955,293,023 543,846,559

Approved by the board of directors on 9 April 2001

)Zhang Xiaoshu )

) DirectorsMiao Jianmin )

)


BALANCE SHEETAt 31 December 2000



Note 2000$

Assets

Fixed assets 12 1,718,697Investments in subsidiaries 13 33,542,008Investments in securities 14 43,318,610Amounts due from subsidiaries 15 346,380,511Trade and other receivables 16 305,578Cash and cash equivalents 19 16,948,814

442,214,218--------------------

Liabilities

Amount due to a related party 15 7,632Amount due to a subsidiary 15 70,069,984Trade and other payables 22 2,471,370

72,548,986--------------------

Net assets 369,665,232

Capital and reserves

Share capital 25 44,687,400Reserves 26 324,977,832

369,665,232

Approved by the board of directors on 9 April 2001

)Zhang Xiaoshu )

) DirectorsMiao Jianmin )

)


COMBINED CASH FLOWSTATEMENTFor the year ended 31 December 2000(Expressed in Hong Kong dollars)


Note 2000 1999$ $ $ $

Net cash outflow fromoperating activities 27(a) (12,675,808) (5,320,801)

Returns on investmentsand servicing of finance

Interest received 78,157,485 72,718,752Interest paid (232) —Dividends received from

investments 5,575,749 3,709,442Dividends paid (41,000,000) (24,200,000)

Net cash inflow fromreturns on investmentsand servicing of finance 42,733,002 52,228,194

TaxationHong Kong Profits Tax refunded 5,839,412 651,604Hong Kong Profits Tax paid (7,794,921) (1,766,449)

Tax paid (1,955,509) (1,114,845)

Investing activitiesPayment for purchase of

fixed assets (4,051,212) (440,624)Proceeds from sales of

fixed assets 3,852,771 36,900Payment for purchase of

investment properties (1,977,297) (1,200,000)Proceeds from sales of

investment properties 1,865,698 34,402,559Payment for purchase of

held-to-maturity securities (241,735,030) (308,212,192)Proceeds from sales of

held-to-maturity securities 149,362,535 115,727,685Payment for purchase of

listed securities (326,005,577) (286,074,953)Proceeds from sales of

listed securities 216,063,895 298,829,360Receipts from repayment of

mortgage and staff loans 33,597,318 38,594,121Increase in loans and advances (15,767,740) (33,857,427)Decrease in pledged

deposits at bank 13,999,646 10,665,025Decrease in deposits at bank

with original maturitymore than three months 15,009,316 73,162,328

Net cash outflow frominvesting activities (155,785,677) (58,367,218)

Net cash outflow beforefinancing carried forward (127,683,992) (12,574,670)

COMBINED CASH FLOWSTATEMENT



Note 2000 1999$ $ $ $

Net cash outflow beforefinancing brought (127,683,992) (12,574,670)forward

Financing

Shares issued 293,716,508 —

Net cash inflow fromfinancing 293,716,508 —

Increase/(decrease) incash and cashequivalents 166,032,516 (12,574,670)

Cash and cashequivalents at1 January 273,520,050 286,094,720

Cash and cashequivalents at31 December 19 439,552,566 273,520,050


NOTES ON THE ACCOUNTS(Expressed in Hong Kong dollars)


1 SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These accounts have been prepared in accordance with all applicable Hong KongStatements of Standard Accounting Practice (“SSAP”) and Interpretations issued bythe Hong Kong Society of Accountants, accounting principles generally accepted inHong Kong and the requirements of the Hong Kong Companies Ordinance. In so doing,these accounts have opted to adopt SSAP 9 (revised) “Events after the balance sheetdate” and SSAP 14 (revised) “Leases”, which are mandatory for accounting periodsbeginning on or after 1 January 2001 and 1 July 2001, instead of SSAP 9 “Accountingfor post balance sheet events” and SSAP 14 “Accounting for leases and hire purchasecontracts” issued in 1984 and 1987 respectively. These accounts also comply with theapplicable disclosure provisions of the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited (“The Listing Rules”). A summary of the significantaccounting policies adopted by the Group is set out below.

(b) Reorganisation and basis of preparation of accounts

The Company was incorporated in Hong Kong with limited liability on 18 February 2000under the Hong Kong Companies Ordinance and through a reorganisation became theholding company of the Group on 26 May 2000. The Group has been treated as acontinuing entity and accordingly the combined accounts have been prepared on thebasis that the Company was the holding company of the Group for both years presented,rather than from 26 May 2000. The results of the Group for the years ended 31 December1999 and 2000 include the results of the Company and its subsidiaries with effect from1 January 1999 or since their respective dates of incorporation, where this is a shorterperiod. The combined balance sheet as at 31 December 1999 is a combination of thebalance sheets of all the companies comprising the Group as at 31 December 1999. Inthe opinion of the directors, the resulting combined accounts give a more meaningfulview of the results and state of the affairs of the Group as a whole.

All material intercompany transactions are eliminated on combination.

As the Company was incorporated on 18 February 2000, no comparative figures arepresented in respect of the Company’s balance sheet.

The measurement basis used in the preparation of the accounts is historical cost modifiedby the revaluation of investment properties and land and buildings, and the marking tomarket of certain investments in securities as explained in the accounting policies setout below.



1 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(c) Investments in subsidiaries

A subsidiary is a company in which the Group, directly or indirectly, holds more thanhalf of the issued share capital, or controls more than half of the voting power, or controlsthe composition of the board of directors.

Investments in subsidiaries in the Company’s balance sheet are stated at cost less anyprovision for diminution in value which is other than temporary as determined by thedirectors for each subsidiary individually. Any such provisions are recognised as anexpense in the profit and loss account.

(d) Investments in securities

The Group’s and the Company’s policies for investments in securities other thaninvestments in subsidiaries are as follows:

(i) Dated debt securities that the Group and/or the Company have the ability andintention to hold to maturity are classified as held-to-maturity securities. Held-to-maturity securities are stated in the balance sheet at amortised cost less anyprovisions for diminution in value. Provisions are made when the carrying amountsare not expected to be fully recovered and are recognised as an expense in theprofit and loss account, such provisions being determined for each investmentindividually.

(ii) Investments held on a continuing basis for an identified long-term purpose areclassified as investment securities which are stated in the balance sheet at costless any provisions for diminution in value. Provisions are made when the fair valueshave declined below the carrying amounts, unless there is evidence that the declineis temporary, and are recognised as an expense in the profit and loss account,such provisions being determined for each investment individually.

(iii) Provisions against the carrying amount of held-to-maturity securities and investmentsecurities are written back when the circumstances and events that led to the write-down or write-off cease to exist and there is persuasive evidence that the newcircumstances and events will persist for the foreseeable future.




(d) Investments in securities (Continued)

(iv) All other securities are classified as other investments and stated in the balancesheet at fair value. Changes in fair value are recognised in the profit and lossaccount as they arise.

(v) Profits or losses on disposal of investments in securities are determined as thedifference between the estimated net disposal proceeds and the carrying amountof the investments and are accounted for in the profit and loss account as theyarise.

(e) Fixed assets

(i) Fixed assets are carried in the balance sheets on the following bases:

— investment properties with an unexpired lease term of more than 20 yearsare stated in the balance sheet at their open market value. It is the Group’spolicy to undertake valuations at intervals of not more than three years byindependent professional valuers on an open market value basis. In theintervening years investment properties will be valued at open market valueby independent professional valuers or appropriately qualified directors orexecutives within the Group on an annual basis; and

— other property, plant and equipment are stated in the balance sheet at costless accumulated depreciation less any impairment in value as determinedby the directors.

(ii) Surpluses arising on revaluation are credited on a portfolio basis to the profit andloss account to the extent of any deficit arising on revaluation previously chargedto the profit and loss account and are thereafter taken to the investment propertiesrevaluation reserve; deficits arising on revaluation are firstly set off against anyprevious revaluation surpluses and thereafter charged to the profit and loss account.




(e) Fixed assets (Continued)

(iii) The carrying amount of fixed assets (other than investment properties with anunexpired lease term of more than 20 years) is reviewed periodically in order toassess whether the recoverable amount has declined below the carrying amount.When such a decline has occurred, the carrying amount is reduced to therecoverable amount. The amount of the reduction is recognised as an expense inthe profit and loss account. In determining the recoverable amount, expected futurecash flows generated by the fixed assets have not been discounted to their presentvalues.

When the circumstances and events that led to the write-down or write-off ceaseto exist, any subsequent increase in the recoverable amount of an asset is writtenback to the profit and loss account. The amount written back is reduced by theamount that would have been recognised as depreciation had the write-down orwrite-off not occurred.

(iv) Subsequent expenditure relating to a fixed asset that has already been recognisedis added to the carrying amount of the asset when it is probable that future economicbenefits, in excess of the originally assessed standard of performance of the existingasset, will flow to the Group. All other subsequent expenditure is recognised as anexpense in the period in which it is incurred.

(v) Gains or losses arising from the retirement or disposal of a fixed asset aredetermined as the difference between the estimated net disposal proceeds andthe carrying amount of the asset and are recognised in the profit and loss accounton the date of retirement or disposal. On disposal of an investment property, therelated portion of surpluses or deficits previously taken to the investment propertiesrevaluation reserve is also transferred to the profit and loss account for the year.




(f) Amortisation and depreciation

(i) No depreciation is provided on freehold land and investment properties with anunexpired lease term of over 20 years.

(ii) Depreciation is calculated to write off the cost or revalued amount of fixed assetsover their estimated useful lives using the straight-line method, at the followingrates per annum:

Leasehold land over the unexpired term of leaseBuildings 2%Furniture 20%Fixtures the shorter of 20% or over the unexpired

term of leaseComputer equipment 20%Motor vehicles 20%

(g) Insurance liabilities

Estimates and assumptions have been made in arriving at the insurance liabilitiescomprising insurance funds and provision for outstanding claims. The directors continuallyreview the estimates and make adjustments as necessary, but actual results can turnout significantly different from what is envisioned when these estimates are made.

(i) Insurance funds

Insurance funds represent the balance of net written premiums and related incomeover net claims paid and related acquisition costs in respect of open underwritingyears of general insurance business. Acquisition costs comprise the expenses,both direct and indirect, of acquiring business. At the end of each accounting year,the adequacy of the amount of insurance funds to cover estimated liabilities isreviewed by the directors having regard to the future development of openunderwriting years. For open underwriting years, no profits are recognised, butmaterial deficiencies are recognised as soon as they are foreseen.




(g) Insurance liabilities (Continued)

(ii) Life assurance fund

The proportion of retained life assurance premiums written in a year relating to theperiod of risk from 1 January in the following year to the subsequent date of expiryof policies is carried forward as a provision for unearned premiums after includingcommission received and making an allowance for commission paid.

(iii) Provision for outstanding claims

Provision for outstanding claims represents estimated liabilities relating to the closedunderwriting years of general insurance business in respect of reported claimsand claims incurred but not reported after deducting amounts recoverable fromreinsurers. This provision, although not capable of precise assessment, is made inthe light of available information and after taking into account the claims handlingexpenses.

(h) Translation of foreign currencies

Foreign currency transactions during the year are translated into Hong Kong dollars atthe approximate exchange rates ruling at the transaction dates. Monetary assets andliabilities denominated in foreign currencies are translated into Hong Kong dollars atthe exchange rates ruling at the balance sheet date. The resulting exchange gains andlosses are included in the profit and loss account.

The results of an overseas branch are translated into Hong Kong dollars at the averageexchange rates for the year; balance sheet items are translated at the rates of exchangeruling at the balance sheet date. The exchange differences are dealt with as a movementin reserve.

(i) Deferred taxation

Deferred taxation is provided using the liability method in respect of the taxation effectarising from all material timing differences between the accounting and tax treatment ofincome and expenditure, which are expected with reasonable probability to crystallisein the foreseeable future.

Future deferred tax benefits are not recognised unless their realisation is assured beyondreasonable doubt.




(j) Revenue recognition

Provided it is probable that the economic benefits will flow to the Group and the revenueand cost, if applicable, can be measured reliably, revenue is recognised in the profit andloss account as follows:

(i) Premiums and commission income

Premiums and commission income are recognised in the revenue account whenthe underwriting transactions are reported from cedants. Any underwritingtransactions reported subsequent to the balance sheet date are included in therevenue account for the immediate following year.

(ii) Rental income from operating leases

Rental income receivable under operating leases is recognised on a straight-linebasis over the terms of the respective leases.

(iii) Brokerage income

Brokerage income is recognised when the service is rendered.

(iv) Dividends

— Dividend income from unlisted investments is recognised when theshareholder’s right to receive payment is established.

— Dividend income from listed investments is recognised when the share priceof the investment goes ex-dividend.

(v) Interest income

— Interest income from dated debt securities intended to be held to maturity isrecognised as it accrues, as adjusted by the amortisation of the premium ordiscount on acquisition, so as to achieve a constant rate of return over theperiod from the date of purchase to the date of maturity.

— Interest income from bank deposits is accrued on a time-apportioned basison the principal outstanding and at rates applicable.




(k) Underwriting results

Revenue accounts in respect of non-life insurance business are prepared on the three-year fund accounting basis, under which, an account is maintained for each underwritingyear in which premiums, claims, expenses and other relevant income and expenditureare recorded. Each underwriting year account is held open for two years, and at the endof third accounting year the revenue accounts are closed and the balances are transferredto the profit and loss account.

The revenue account in respect of life assurance business is prepared on an annualbasis and is closed at the end of each accounting year and the balance is transferred tothe profit and loss account.

(l) Operating leases

Rentals payable under operating leases are accounted for in the profit and loss accounton a straight-line basis over the periods of the respective leases.

(m) Related parties

Parties are considered to be related to the Group if the Group has the ability, directly orindirectly, to control the party or exercise significant influence over the party in makingfinancial and operating decisions, or vice versa, or where the Group and the party aresubject to common control or common significant influence. Related parties may beindividuals or other entities.

(n) Cash equivalents

Cash equivalents are short-term, highly liquid investments which are readily convertibleinto known amounts of cash without notice and which were within three months of maturitywhen acquired. For the purpose of the cash flow statement, cash equivalents wouldalso include advances from banks repayable within three months from the date of theadvances.

(o) Trust account

No account of assets held or liabilities incurred by the Group as trustee has been included.




(p) Retirement costs

The Group operates a defined contribution retirement scheme and the contributionsare charged to the profit and loss account as and when incurred.

(q) Management expenses

Management expenses incurred for operating the business are allocated proportionatelyto the revenue accounts and profit and loss account based on the proportion of staffcosts between underwriting and non-underwriting departments.

2 TURNOVER

The principal activity of the Company is investment holding. The principal activities of theGroup are the underwriting of treaty and facultative reinsurance of all classes of generalbusiness, including non-marine and marine, and certain classes of long term business. TheGroup also carries on reinsurance broking and, to support its reinsurance activities, holdssecurity, money market and property investments.

Turnover represents gross premiums written and brokerage income.

2000 1999$ $

Gross premiums writtenNon-life

— Non-proportional 146,175,134 120,893,829— Proportional 531,927,060 515,351,351

Life 5,350,363 3,885,795

683,452,557 640,130,975Brokerage income 7,591,722 4,183,342

691,044,279 644,314,317



2 TURNOVER (Continued)

An analysis of the Group’s turnover by geographical locations of customers is as follows:

2000 1999$ $

Hong Kong and Macau 290,516,522 283,667,856The People’s Republic of China (“PRC”)

(other than Hong Kong and Macau) 60,570,473 43,521,766Japan 57,607,210 65,239,618Rest of Asia 143,389,321 123,995,409

Sub-total for Asia 552,083,526 516,424,649

Europe 98,926,310 95,339,214North America 20,007,215 16,531,151South America 14,056,142 10,090,767Australia 4,204,777 3,546,816Africa 1,766,309 2,381,720

691,044,279 644,314,317

3 OTHER REVENUE

2000 1999$ $

Dividend income from listed securities 5,575,749 3,669,442Dividend income from unlisted securities — 40,000Interest income from listed securities 44,899,505 39,459,929Interest income from unlisted securities 8,374,747 8,593,573Other interest income 24,883,233 24,665,250Rental income 3,229,715 3,662,855Others 559,899 289,996

87,522,848 80,381,045



4 OTHER NET (LOSS)/INCOME

2000 1999$ $

Gains/(losses) on disposal of fixed assets 1,497,973 (53,568)(Losses)/gains on disposal of investment properties (782,563) 1,382,556(Deficit)/surplus on revaluation of investment

properties (3,309,036) 300,000Net realised and unrealised (losses)/gains on

listed securities (25,830,333) 62,263,317Gains on disposal of unlisted securities 1,151,889 1,155,948Recovery from losses on disposal of dated debt

securities 20,852,155 —Losses on disposal of dated debt securities (17,761,405) —Amortisation of discounts of dated debt securities 11,847,760 12,950,851Provision for diminution in value of held-to-

maturity securities — (2,851,511)Provision for diminution in value of unlisted

investments (4,127,000) —Others 8,646 135,012

(16,451,914) 75,282,605



5 PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION

Profit from ordinary activities before taxation is arrived at after charging:

2000 1999$ $

Staff costs (other than retirement benefit costs) 19,853,816 20,799,342Retirement benefit costs 1,163,052 1,217,304Less: Amounts deferred and included in

insurance funds (11,407,432) (12,224,270)

9,609,436 9,792,376

Average number of employees 62 61

Interest expense 232 —Auditors’ remuneration 725,485 402,272Depreciation 2,174,820 4,933,125Operating lease charges: minimum lease payments

— hire of properties 346,924 —Net exchange losses 14,917,810 2,289,034

6 TAXATION

(a) Taxation in the combined profit and loss account represents:

2000 1999$ $

Provision for Hong Kong Profits Tax for the year 6,586,447 —Overprovision in respect of prior years (3,134,386) —

3,452,061 —Taxation outside Hong Kong 776,957 3,925,000Deferred taxation (note 23(a)) (3,144,171) (633,000)

1,084,847 3,292,000



6 TAXATION (Continued)

The provision for Hong Kong Profits Tax represents the Group’s estimated Profits Taxliability calculated at the standard tax rate of 16% (1999: 16%) on its assessable profitsfrom life and other insurance businesses except for its assessable profits from thebusiness of reinsurance of offshore risks, which is calculated at one-half of the standardtax rate of 8% (1999: 8%).

Taxation outside Hong Kong is calculated at the rates prevailing in the respectivejurisdictions.

(b) Taxation in the balance sheets represents:

The Group The Company2000 1999 2000

$ $ $

Provision for Hong KongProfits Tax for the year 6,586,447 — —

Provisional Profits Tax paid (3,419,220) (183,258) —

3,167,227 (183,258) —

Balance of Hong Kong ProfitsTax provision relatingto prior years 1,879,578 4,474,511 —

Taxation outside Hong Kong 8,176,957 6,659,000 —

13,223,762 10,950,253 —

Amount of taxation payableexpected to be settled aftermore than one year 8,135,897 7,400,000 —



7 DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong CompaniesOrdinance is as follows:

2000 1999$ $

Executive directors:— Fees — —— Salaries and other emoluments 2,009,530 2,009,540— Discretionary bonuses 1,922,000 220,000— Retirement scheme contributions 251,334 251,334

4,182,864 2,480,874

Non-executive directors:— Fees 200,000 —— Salaries and other emoluments — —— Discretionary bonuses 96,000 —— Retirement scheme contributions — —

296,000 —

In addition to the above emoluments, certain directors were granted share options under theCompany’s share option scheme. The details of these benefits in kind are disclosed underthe heading “Directors’ interests in shares” in the directors’ report.

The remuneration of the directors is within the following bands:

2000 1999Number of Number of

$ directors directors

Nil — 1,000,000 7 41,000,001 — 1,500,000 1 21,500,001 — 2,000,000 1 —

There were no amounts paid during the year (1999: $Nil) to former directors in connectionwith their retirement from employment with the Group.


/4 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

8 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, two (1999: two) are directors whoseemoluments are disclosed in note 7. The aggregate of the emoluments in respect of theother three (1999: three) individuals are as follows:

2000 1999$ $

Salaries and other emoluments 1,879,370 1,981,617Discretionary bonuses 829,000 435,103Retirement scheme contributions 232,083 198,560

2,940,453 2,615,280

The emoluments of the three (1999: three) individuals with the highest emoluments are withinthe following bands:

2000 1999Number of Number of

$ individual individual

Nil -1,000,000 2 31,000,001 — 1,500,000 1 —

There were no amounts paid during the year (1999: $Nil) to the five highest paid individualsas an inducement to join or upon joining the Group or as compensation of loss of office.

9 PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The profit attributable to shareholders includes a profit of $42,406,724 which has been dealtwith in the accounts of the Company.


/�ANNUAL REPORT 2000

10 DIVIDENDS

2000 1999$ $

Proposed final dividend — 126,823,127

The proposed final dividend for the year ended 31 December 1999 is a combination of finaldividends of $121,823,127 and $5,000,000 proposed by China International ReinsuranceCompany Limited (“CIRe”) and SINO-RE Reinsurance Brokers Limited (“SINO-RE”) andpayable to their then shareholders. In this connection, a total of $85,823,127 was distributedas dividend in specie by CIRe. The remaining amount was paid by cash during the year.

Pursuant to the resolution of the meeting of directors on 9 April 2001, the directorsrecommended the payment of a final dividend of $0.04 per ordinary share in respect of theyear ended 31 December 2000. As a result of the early adoption of SSAP 9 (revised) “Eventsafter the balance sheet date”, the proposed dividend is not recognised for the year ended 31December 2000 in these accounts.

11 EARNINGS PER SHARE

(a) Basic earnings per share

The companies comprising the Group underwent a reorganisation on 26 May 2000 torationalise the Group’s structure in preparation for the listing of the Company’s shareson The Stock Exchange of Hong Kong Limited (“The Stock Exchange”). Prior to theplacing and public offer of 297,208,000 shares (including 118,882,000 shares offeredby the then existing shareholders at the time of the public offer) on 29 June 2000, thenumber of ordinary shares of the Company was 670,842,000.

The calculation of basic earnings per share for 2000 is based on the combined profitattributable to shareholders for the year ended 31 December 2000 of $117,729,644divided by the weighted average number of 781,989,699 shares, assumed to be inissue during the year.

The calculation of basic earnings per share for 1999 is based on the combined profitattributable to shareholders for the year ended 31 December 1999 of $101,893,294divided by 670,842,000 shares in issue prior to the placing and public offer on 29 June2000.


/� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

11 EARNINGS PER SHARE (Continued)

(b) Diluted earnings per share

The calculation of diluted earnings per share for 2000 is based on the combined profitattributable to shareholders of $117,729,644 and the weighted average number of sharesof 782,887,013 shares after adjusting for the effects of all dilutive potential shares.

There were no potential dilutive ordinary shares in issue during the year ended 31December 1999.

(c) Reconciliations

2000Number of

shares

Weighted average number of shares used incalculating basic earnings per share 781,989,699

Deemed issue of shares for no considerationarising from share options 897,314

Weighted average number of shares used incalculating diluted earnings per share 782,887,013


/�ANNUAL REPORT 2000

12 FIXED ASSETS

(a) The Group

Land and Furniture Computer Motor Investment

buildings and fixtures equipment vehicles Subtotal properties Total

$ $ $ $ $ $ $

Cost or valuation:

At 1 January 2000 143,041,447 7,963,396 7,406,188 647,000 159,058,031 126,850,000 285,908,031

Additions — 3,440,750 610,462 — 4,051,212 1,977,297 6,028,509

Disposals (2,547,015) (42,200) (31,882) — (2,621,097) (2,648,261) (5,269,358)

Deficit on revaluation — — — — — (3,309,036) (3,309,036)

Exchange difference (192,174) — 8,019 — (184,155) — (184,155)

At 31 December 2000 140,302,258 11,361,946 7,992,787 647,000 160,303,991 122,870,000 283,173,991---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------

Representing:

Cost 140,302,258 11,361,946 7,992,787 647,000 160,303,991 — 160,303,991

Valuation — 2000 — — — — — 122,870,000 122,870,000

140,302,258 11,361,946 7,992,787 647,000 160,303,991 122,870,000 283,173,991

Accumulated

depreciation:

At 1 January 2000 78,633,980 7,680,478 6,177,088 647,000 93,138,546 — 93,138,546

Charge for the year 1,223,001 421,554 530,265 — 2,174,820 — 2,174,820

Written back on

disposal (197,374) (38,680) (30,245) — (266,299) — (266,299)

Exchange difference (13,453) — 8,700 — (4,753) — (4,753)

At 31 December 2000 79,646,154 8,063,352 6,685,808 647,000 95,042,314 — 95,042,314---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------

Net book value:

At 31 December 2000 60,656,104 3,298,594 1,306,979 — 65,261,677 122,870,000 188,131,677

At 31 December 1999 64,407,467 282,918 1,229,100 — 65,919,485 126,850,000 192,769,485


/� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

12 FIXED ASSETS (Continued)

(b) The Company

Furnitureand fixtures

$

Cost:

At 18 February 2000 —Additions 1,799,383

At 31 December 2000 1,799,383--------------------

Accumulated depreciation:

At 18 February 2000 —Charge for the year 80,686

At 31 December 2000 80,686--------------------

Net book value:At 31 December 2000 1,718,697

(c) The analysis of net book value of properties is as follows:


$ $ $

In Hong Kong— Long leases 125,745,411 128,159,997 —— Medium-term leases 13,000,693 13,100,000 —

Outside Hong Kong— Freehold — 2,547,470 —— Long leases 39,440,000 39,440,000 —— Medium-term leases 5,340,000 8,010,000 —

183,526,104 191,257,467 —


//ANNUAL REPORT 2000


(d) The following are details of the Group’s properties held

for own use:

Location Lease term Existing use

1 Unit A, 29/F, United Centre, Long Commercial95 Queensway,Admiralty, Hong Kong

2 Unit K, 17/F, World Tech Centre, Medium Commercial95 How Ming Street,Kwun Tong, Kowloon

for investment purposes:


1 Flat F, 5/F, Mai Kei Industrial Building, Medium Vacant5 San Hop Lane,Tuen Mun, New Territories

2 B4, 3 Kapok Path, Medium ResidentialPalm Springs Phase 1C,Yuen Long, New Territories

3 B4, 5 Kapok Path, Medium ResidentialPalm Springs Phase 1C,Yuen Long, New Territories

4 Flat 65, 16/F, Tower 11 and Long ResidentialCar Park No. 82,Hong Kong Parkview,88 Tai Tam Reservoir Road, Hong Kong




(d) The following are details of the Group’s properties held (Continued)

for investment purposes: (Continued)




7 Unit A, 16/F, Wing Hang Insurance Building, Long Vacant11 Wing Kut Street, Hong Kong

8 Unit B, 16/F, Wing Hang Insurance Building, Long Commercial11 Wing Kut Street, Hong Kong

9 Unit C, 16/F, Wing Hang Insurance Building, Long Commercial11 Wing Kut Street, Hong Kong

10 Unit A, 22/F, Wing Hang Insurance Building, Long Commercial11 Wing Kut Street, Hong Kong

11 Units B and C, 22/F, Long CommercialWing Hang Insurance Building,11 Wing Kut Street, Hong Kong

12 Workshop E1, 3/F, Medium IndustrialHang Fung Industrial Building Phase 1,2G Hok Yuen Street, Kowloon


/1ANNUAL REPORT 2000


(d) The following are details of the Group’s properties held (Continued)

for investment purposes: (Continued)


13 Units 101-104, 301-304, 502-504, Long Vacant701, 703 and 704 of Xinxing Court,Units 103, 106, 1103 and 1104 of Xingui Courtand Units 103, 104 and 902-904 of Xinying Court,P. & R. Times Mansion,Fuqiang Road, Futian District,Shenzhen, PRC

14 Units 2025-2030, Level 2, Medium CommercialLuohu Commercial Plaza,Jianshe Road, Luohu District,Shenzhen, PRC

(e) Investment properties of the Group were revalued at 31 December 2000 by anindependent firm of surveyors, RHL Appraisal Limited, external professional valuers,on an open market value basis. The revaluation deficit of $3,309,036 has been debitedto the profit and loss account (note 4).




(f) The Group leases out investment properties under operating leases. The leases typicallyrun for an initial period of two to five years, with an option to renew the lease after thatdate at which time all terms are renegotiated. Lease payments are usually increasedannually to reflect market rentals. None of the leases includes contingent rentals. Thegross carrying amounts of investment properties of the Group held for use in operatingleases were $82,270,000 (1999: $67,050,000).

The Group’s total future minimum lease payments under non-cancellable operatingleases are receivable as follows:

2000 1999$ $

Within 1 year 3,877,522 2,756,308After 1 but within 5 years 1,981,355 1,987,102

5,858,877 4,743,410


/3ANNUAL REPORT 2000

13 INVESTMENTS IN SUBSIDIARIES

2000$

Unlisted shares, at cost 33,542,008

Details of the Company’s subsidiaries at the date of this report are as follows:

Place of Issued Attributable equityincorporation share interest percentage Principal

Name of company and operation capital Direct Indirect activities

China International Hong Kong Ordinary — 100 ReinsuranceReinsurance $180,000,000 businessCompany Limited Deferred — —

$600,000,000

SINO-RE Reinsurance Hong Kong Ordinary — 100 InsuranceBrokers Limited $4,000,000 broking

Deferred — —$1,000,000

Quicken Assets British Virgin US$1 100 — PropertyLimited Islands holding

(“BVI”)/Hong Kong

Effectual Assets BVI US$20 100 — InvestmentLimited holding

Influential Assets BVI US$20 100 — InvestmentLimited holding

The Company was incorporated in Hong Kong with limited liability on 18 February 2000under the Hong Kong Companies Ordinance and through a reorganisation became the holdingcompany of the Group on 26 May 2000.



13 INVESTMENTS IN SUBSIDIARIES (Continued)

In accordance with the as if basis of preparation, the Company’s past interest in SustainableAssets Limited (“SAL”) has not been included in this report. SAL is a special purpose vehicleestablished to hold certain assets of CIRe totalling approximately $126 million prior to thereorganisation on 26 May 2000. The interest in SAL was partly distributed to the thenshareholders of CIRe in specie. The remaining interest in SAL was disposed of to CIRe’sthen shareholders at its carrying value.

As part of the reorganisation, the then ordinary share capital of $600 million and $1 million inCIRe and SINO-RE respectively were converted into non-voting deferred share capital. Holdersof the non-voting deferred shares in CIRe or SINO-RE are not entitled to share profits, receivenotice of or attend or vote at any general meeting of these companies. On the winding-up ofthese companies, the holders of the non-voting deferred shares are not entitled to thedistribution of the net assets of these companies for the first $100 billion; the balance of netassets, if any, over the first $100 billion shall be distributed among the holders of the ordinaryshares and non-voting deferred shares pari passu among themselves in proportion to theirrespective shareholdings.

14 INVESTMENTS IN SECURITIES


$ $ $

Held-to-maturity debt securities,at amortised cost

Listed:— in Hong Kong 102,449,290 68,799,004 —— outside Hong Kong 557,423,171 575,592,321 —

659,872,461 644,391,325 —Less: Provision for diminution

in value (1,087,164) (8,920,890) —

658,785,297 635,470,435 —Unlisted 163,883,603 165,473,267 —

822,668,900 800,943,702 —----------------------- ----------------------- -----------------------


0�ANNUAL REPORT 2000

14 INVESTMENTS IN SECURITIES (Continued)


$ $ $

Other investments

Listed debt securities, atmarket value— outside Hong Kong 111,280,735 54,418,000 28,118,610

Listed equity securities, atmarket value— in Hong Kong 155,025,621 117,748,917 15,200,000— outside Hong Kong 28,085,283 25,601,578 —

Listed unit trusts and mutualfunds, at market value— outside Hong Kong 23,464,015 36,325,689 —

Unlisted equity securities, atfair value 9,567,971 8,045,000 —

327,423,625 242,139,184 43,318,610----------------------- ----------------------- -----------------------

1,150,092,525 1,043,082,886 43,318,610

Market value of listed securities 993,346,332 786,815,696 43,318,610

Held-to-maturity securitiesmaturing within one year 97,358,441 94,726,359 —

The unlisted held-to-maturity dated debt securities include bonds with amortised cost of$12,169,717 (1999: $51,641,927) issued by entities with AAA rating as assigned by Standardand Poor’s as at 31 December 2000.


0� CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

14 INVESTMENTS IN SECURITIES (Continued)

The Group’s unlisted equity securities include an investment of $8,000,000 (1999: $8,000,000),representing a 20% (1999: 20%) equity interest in Dragon Jade Industrial District Development(Shenzhen) Co., Ltd., a joint venture company established in the PRC engaged in thedevelopment and operation of an industrial property complex in Shenzhen, the PRC. In theopinion of the directors, the Group is not in a position to exercise significant influence overthe financial and operating policies of that company and accordingly, the equity accountingmethod has not been adopted.

Debt securities are covered by a demand bond issued by an independent insurance companyin Hong Kong in amount of $40 million (1999: $Nil) for any capital losses per annum. As at 31December 2000, the Group is entitled to recover capital losses of $20,852,155 (1999: $Nil)under this demand bond as a result of debt restructuring of a debt issuer. The losses and therelated recovery are included in the profit and loss account (note 4).

15 AMOUNTS DUE FROM/(TO) AN IMMEDIATE HOLDING COMPANY/SUBSIDIARIES/RELATED PARTIES

Amounts due from/(to) an immediate holding company/subsidiaries/related parties areunsecured, interest-free and repayable on demand.

16 TRADE AND OTHER RECEIVABLES


$ $ $

Amounts due from cedantsand retrocessionaires 96,576,194 69,278,065 —

Deposits retained by cedants 112,143,943 136,640,505 —Other debtors, deposits and

prepayments 52,201,600 17,438,676 305,578Loans and advances 44,697,624 22,770,726 —

305,619,361 246,127,972 305,578

All of the trade and other receivables, apart from $21,100,214 (1999: $48,002,215) includedin deposits retained by cedants, are expected to be recovered within one year.



16 TRADE AND OTHER RECEIVABLES (Continued)

Amounts due from cedants and retrocessionaires include amounts due from related partiesof $18,319,984 (1999: $16,885,545) which are trade related in nature.

Loans and advances are repayable with the following terms:

Interest Repayment2000 1999 rate term

$ $

Secured mortgageloans:

— to staff membersof the Group 111,148 15,341,233 3% to prime 20 years by

instalments— to a third party — 2,599,493 prime + 0.5% 20 years by

instalmentsUnsecured loans:

— to a relatedcompany 4,830,000 4,830,000 free on demand

— to third parties 39,756,476 — 8% 10 years

44,697,624 22,770,726

Included in trade and other receivables are trade debtors with the following ageing analysis:


$ $ $

Current 15,984,000 10,033,308 —0 to 3 months overdue 44,529,690 31,198,742 —More than 3 months overdue but

less than 12 months overdue 31,258,348 18,046,911 —More than 12 months overdue 4,804,156 9,999,104 —

96,576,194 69,278,065 —

Debts are generally due within 90 days from the date of billing.



17 LOANS TO OFFICERS

Loans to officers of the Company disclosed pursuant to section 161B of the Hong KongCompanies Ordinance are as follows:

Maximumamount

outstanding Balance at Balance atduring 31 December 1 January

Name of borrower Position Term of loan the year 2000 2000

Ng Yu Lam Deputy Secured on property,Kenneth chief repayable by equal

executive monthly instalments,officer interest-bearing at

3% and 4% 518,036 — 518,036

Lau Siu Mun Executive Secured on property,Sammy director repayable by equal

monthly instalments,interest-bearing at3% and 4% 2,788,141 — 2,788,141

Ng Wo Chung Assistant Secured on property,Joe general repayable by equal

manager monthly instalments,interest-bearing at3% and 4% 384,296 — 384,296

There was no interest due but unpaid nor any provisions made against these loans at 31December 2000.

18 PLEDGED DEPOSITS AT BANK

The Group has pledged bank deposits of $17,522,378 (1999: $21,522,024) and $Nil (1999:$10,000,000) to banks to secure general banking facilities granted to the Group and relatedcompanies respectively.


0/ANNUAL REPORT 2000

19 CASH AND CASH EQUIVALENTS


$ $ $

Deposits with banks and otherfinancial institutions with originalmaturity less than three months 350,437,049 193,826,314 16,585,856

Cash at bank and in hand 89,115,517 79,693,736 362,958

439,552,566 273,520,050 16,948,814

20 INSURANCE FUNDS

The Group2000 1999

$ $

General insurance business

Proportional 298,410,100 285,115,020Non-proportional 155,053,378 227,722,712

453,463,478 512,837,732



21 PROVISION FOR OUTSTANDING CLAIMS

The Group

Claims Incurred but 2000reported not reported Total

$ $ $

Gross claims 591,282,614 195,523,687 786,806,301Less: Reinsurers’ share (128,092,969) (25,513,994) (153,606,963)

463,189,645 170,009,693 633,199,338

Represented by:

General insurance business— Proportional 239,061,484 61,622,973 300,684,457— Non-proportional 224,128,161 108,386,720 332,514,881

463,189,645 170,009,693 633,199,338

Claims Incurred but 1999reported not reported Total

$ $ $

Gross claims 492,204,237 298,910,221 791,114,458Less: Reinsurers’ share (98,284,506) (6,681,478) (104,965,984)

393,919,731 292,228,743 686,148,474

Represented by:

General insurance business— Proportional 203,304,768 69,620,722 272,925,490— Non-proportional 190,614,963 222,608,021 413,222,984

393,919,731 292,228,743 686,148,474


01ANNUAL REPORT 2000

22 TRADE AND OTHER PAYABLES


$ $ $

Amounts due to cedants andretrocessionaires 21,086,971 27,503,729 —

Deposits retained fromretrocessionaires 11,770,867 23,921,424 —

Other creditors, accrued chargesand temporary receipts 11,166,888 20,938,272 2,471,370

Proposed dividend — 41,000,000 —

44,024,726 113,363,425 2,471,370

All of the trade and other payables are expected to be settled within one year.

Amounts due to cedants and retrocessionaires include amounts due to related parties of$582,308 (1999: $1,645,748) which are trade related in nature.

Included in trade and other payables are trade creditors with the following ageing analysis:


$ $ $

Current 135,000 241,000 —0 to 3 months overdue 11,362,000 17,213,000 —More than 3 months overdue but

less than 12 months overdue 7,908,000 3,740,000 —More than 12 months overdue 1,681,971 6,309,729 —

21,086,971 27,503,729 —



23 DEFERRED TAXATION

(a) Movements on deferred taxation of the Group comprise:

2000 1999$ $

At 1 January 3,460,000 4,093,000Transfer to the profit and loss account (note 6(a)) (3,144,171) (633,000)

At 31 December 315,829 3,460,000

(b) Major components of deferred tax of the Group are set out below:

2000 1999Potential Potentialliabilities liabilities

Provided unprovided Provided unprovided$ $ $ $

Depreciationallowances inexcess of relateddepreciation — 342,776 — 191,496

Others 315,829 — 3,460,000 —

315,829 342,776 3,460,000 191,496

Others represent deferred tax effects of timing differences arising from the revaluationof investment properties situated in the PRC.

(c) No provision for deferred taxation for the Company has been made as the effect of alltiming differences is immaterial.



24 MATURITY PROFILE

(a) The Group1 year 5 years

or less or lessRepayable 3 months but over but over After

on demand or less 3 months 1 year 5 years Undated Total$ $ $ $ $ $ $

2000

Assets

Deposits at bank withoriginal maturitymore than 3 months — 467,421 — — — — 467,421

Deposits at banks andother financialinstitutions withoriginal maturityless than 3 months 3,011,843 347,425,206 — — — — 350,437,049

Certificates ofdeposit held — — 15,039,126 — — — 15,039,126

Debt securities (underheld-to-maturity) — 31,478,364 73,189,752 417,414,995 285,546,663 — 807,629,774

Debt securities (underother investmentsin securities) — — — 8,151,000 19,967,610 83,162,125 111,280,735

3,011,843 379,370,991 88,228,878 425,565,995 305,514,273 83,162,125 1,284,854,105

1999

Assets

Deposits at bank withoriginal maturitymore than 3 months — 15,476,737 — — — — 15,476,737

Deposits at banks andother financialinstitutions withoriginal maturityless than 3 months 38,578,560 155,247,754 — — — — 193,826,314

Certificates ofdeposit held — 3,036,044 — 5,000,500 23,322,000 — 31,358,544

Debt securities (underheld-to-maturity) — 57,345,995 83,243,065 444,375,175 184,620,923 — 769,585,158

Debt securities (underother investmentsin securities) — — — — — 54,418,000 54,418,000

38,578,560 231,106,530 83,243,065 449,375,675 207,942,923 54,418,000 1,064,664,753



24 MATURITY PROFILE (Continued)

(b) The Company

1 year 5 years

or less or less

Repayable 3 months but over but over After

on demand or less 3 months 1 year 5 years Undated Total

$ $ $ $ $ $ $

2000

Assets

Deposits at banks and

other financial

institutions with

original maturity

less than 3 months — 16,585,856 — — — — 16,585,856

Debt securities (under

other investments

in securities) — — — 8,151,000 19,967,610 — 28,118,610

— 16,585,856 — 8,151,000 19,967,610 — 44,704,466



25 SHARE CAPITAL

2000 1999$ $

Authorised:

2,000,000,000 ordinary shares of $0.05 each 100,000,000 801,000,000

Issued and fully paid:

893,748,000 ordinary shares of $0.05 each 44,687,400 601,000,000

All the shares issued by the Company rank pari passu and do not carry pre-emptive rights.

(a) The 1999 comparative amounts represent the combined issued share capital of thecompanies comprising the Group as at 31 December 1999 on the basis set out in note1(b).

(b) The Company was incorporated in Hong Kong on 18 February 2000 under the HongKong Companies Ordinance. As at the date of incorporation of the Company, its initialauthorised share capital was 1,000 shares of $1.00 each. On 18 February 2000, 2shares were alloted, issued and fully paid at par. Pursuant to a meeting of the directorson 23 March 2000, 98 shares of $1.00 each were alloted, issued and fully paid at par.

(c) Pursuant to a written resolution of all the shareholders of the Company on 24 May2000,

(i) each of the then existing shares of $1.00 each in the share capital of the Companywas divided into 20 shares of $0.05 each; and

(ii) the authorised share capital of the Company was increased from $1,000 to$100,000,000 by the creation of an additional 1,999,980,000 shares of $0.05 each,ranking pari passu with the existing shares of the Company.



25 SHARE CAPITAL (Continued)

(d) Pursuant to a meeting of directors on 26 May 2000, the Company alloted and issued anaggregate of 335,420,000 shares of $0.05 each to China Insurance H.K. (Holdings)Company Limited (“CIHK”) and The Ming An Insurance Company (Hong Kong), Limited(“Ming An”), the Company’s shareholders, as consideration for the acquisition of theentire issued share capital of Effectual Assets Limited now comprising the Group.

Pursuant to a meeting of directors on 26 May 2000, the Company alloted and issued anaggregate of 335,420,000 shares of $0.05 each to CIHK and Ming An, the Company’sshareholders, as consideration for the acquisition of the entire issued share capital ofInfluential Assets Limited now comprising the Group.

(e) On 29 June 2000, an aggregate of 178,326,000 newly issued shares together with118,882,000 shares held by the then existing shareholders were offered for subscriptionat a price of $1.43 per share upon the listing of the Company’s share on The StockExchange. The Group raised approximately $231,166,322 (including interest income)net of related expenses from the offer.

(f) Pursuant to the over-allotment option granted by the Company to the global coordinator,BNP Prime Peregrine Securities Limited, as stated in the prospectus of the Companydated 20 June 2000, the global coordinator exercised the option on 14 July 2000, whichresulted in an additional issue of 44,580,000 shares of the Company. The Group raisedapproximately $63,749,000 from this issue. The additional shares issued representedapproximately 5% of the Company’s enlarged issued share capital immediately afterthe share offer and the exercise of the over-allotment option.

(g) Share option scheme

Pursuant to a written resolution passed on 7 November 2000, a share option schemefor employees was approved and the directors may, at their discretion, invite anyemployee or director of the Group to take up options to subscribe for shares of theCompany at a price to be determined by the board which will not be less than 80 percent of the average closing prices of the shares of the Company on The Stock Exchangefor the five trading days immediately preceding the date of offer of the option or thenominal value of the shares, whichever is the higher.

The maximum number of shares in respect of which options may be granted under theshare option scheme of the Company may not (when aggregated with shares subject toany other employee share option scheme) exceed in nominal amount 10 per cent of theissued share capital of the Company from time to time, excluding for this purpose anyshares which have been duly allotted and issued pursuant to the scheme.



26 RESERVES

(a) The Group

Share Retainedpremium profits Total

$ $ $

At 1 January 2000 — (57,153,441) (57,153,441)Shares issued 282,571,108 — 282,571,108Acquisition of subsidiaries 567,458,312 — 567,458,312Profit for the year — 117,729,644 117,729,644

At 31 December 2000 850,029,420 60,576,203 910,605,623

Share premium arising from acquisition of subsidiaries represents the minimum amountrequired to be transferred to the share premium account under section 48D of the HongKong Companies Ordinance upon the acquisition of Effectual Assets Limited andInfluential Assets Limited by issuing shares as consideration. This amount representsthe excess of consideration over the nominal value of shares issued after taking themerger relief under section 48D of the Hong Kong Companies Ordinance into account.

(b) The Company

Share Retainedpremium profits Total

$ $ $

At 18 February 2000 — — —Shares issued 282,571,108 — 282,571,108Profit for the year — 42,406,724 42,406,724

At 31 December 2000 282,571,108 42,406,724 324,977,832



27 NOTES TO THE COMBINED CASH FLOW STATEMENT

(a) Reconciliation of profit from ordinary activities before taxation to net cash outflowfrom operating activities

2000 1999$ $

Profit from ordinary activities before taxation 118,814,491 105,185,294Interest charges 232 —Interest income (78,157,485) (72,718,752)Dividend income from investments (5,575,749) (3,709,442)Recovery from losses on disposal of dated debt

securities (20,852,155) —Depreciation 2,174,820 4,933,125(Gains)/losses on sales of fixed assets (1,497,973) 53,568Losses/(gains) on disposal of investment properties 782,563 (1,382,556)Deficit/(surplus) on revaluation of investment

properties 3,309,036 (300,000)Net realised and unrealised losses/(gains) on

listed and unlisted securities 24,678,444 (63,419,265)Losses on disposal of dated debt securities 17,761,405 —Amortization of discounts of bonds (11,847,760) (12,950,851)Provision for diminution in value of held-to-maturity

securities — 2,851,511Provision for diminution in value of unlisted

investments 4,127,000 —Provision written back on diminution

in value of land and buildings — (11,716,046)Increase in trade and other receivables (7,739,887) (11,885,395)(Decrease)/increase in trade and other payable (28,338,699) 24,987,099Decrease in amount due from related parties 69,311,378 —Increase in amount due to an immediate holding

company 4,000 —Decrease in provision for outstanding claims (52,949,136) (2,602,982)Increase/(decrease) in life assurance fund 657,683 (263,650)(Decrease)/increase in insurance funds (59,374,254) 37,997,979Exchange losses/(gains) 12,036,238 (380,438)

Net cash outflow from operating activities (12,675,808) (5,320,801)



27 NOTES TO THE COMBINED CASH FLOW STATEMENT (Continued)

(b) Non-cash transactions

(i) Share swap

Pursuant to a meeting of directors on 26 May 2000, the Company alloted andissued an aggregate of 670,840,000 shares of $0.05 each to CIHK and Ming An asconsideration for the acquisition of the entire issued share capital of Effectual AssetsLimited and Influential Assets Limited. No cash was received in respect of suchacquisition.

(ii) Asset swap

Pursuant to the debt restructuring programme of Guangdong Enterprises (Holdings)Limited (“GDE”), the Company’s dated debt securities issued by GDE with carryingvalue of $86,360,812 was exchanged for short term receivables, loans, dated debtsecurities, unlisted and listed equity securities totalling $63,387,845. No cash wasreceived in respect of such exchange. The shortfall net of provision was recognisedin the profit and loss account as losses on disposal of dated debt securities.

(iii) Dividend in specie

On 26 May 2000, as part of the Group’s restructuring plan in anticipation of itslisting on The Stock Exchange, certain assets of CIRe totalling $125,823,127 wereinjected into a newly established wholly owned subsidiary as capital contribution.68% of CIRe’s equity interest in the then wholly owned subsidiary company of$85,823,127 was distributed as dividend in specie. The remaining equity interestof $40,000,000 was disposed of to the then shareholders of CIRe at its carryingvalue.



28 COMMITMENTS

At 31 December 2000, the total future minimum lease payments under non-cancellableoperating leases are payable as follows:

2000 1999$ $

Within 1 year 1,877,940 —After 1 year but within 5 years 1,327,610 —

3,205,550 —

The Group leases a number of properties under operating leases which run for an initialperiod of two years, with an option to renew the leases when all terms are renegotiated.Lease payments are usually increased annually to reflect market rentals. None of the leasesincludes contingent rentals.

29 CONTINGENT LIABILITIES

As at 31 December 2000, there was no outstanding litigation, other than in respect of theGroup’s reinsurance business.



30 CONNECTED TRANSACTIONS

The following is a summary of significant transactions entered into between the Group andits related companies during the year:

Note 2000 1999$ $

Recurring transactions

Business ceded by related companies:Gross premiums written 147,601,984 122,910,595Commission expenses 38,453,912 27,359,591

Business retroceded to related companies:Outward retrocession premiums 1,885,229 5,208,542Commission income 1,132,784 2,017,933

Interest income onLoans to directors and senior management (i) 63,602 147,961Loans to related companies (ii) 1,068,232 6,324,079Premium deposits 436,102 133,861EC Pool (iii) 1,372,783 3,320,699

Insurance brokerage income (iv) 54,145 132,908Securities brokerage fee (v) 633,174 456,553Service fee income (iii) 559,899 582,520Contribution to retirement scheme (vi) 1,163,052 1,217,304Retirement scheme management fee (vi) 36,078 34,000Travel agency services fee paid (vii) 101,956 106,266Insurance expenses covering business risk (viii) 170,348 175,594

Non-recurring transactions

Guarantees made for related companies (xii) — 16,000,000



30 CONNECTED TRANSACTIONS (Continued)

Notes:

(i) CIRe had mortgage loans to certain directors and senior management of the Group. No loan balance was

outstanding as at 31 December 2000 (1999: $3,690,473). The mortgage loans were fully secured by properties.

Interest under the above arrangements was charged at a fixed rate of 3% to 4% per annum. All loans

granted and interest accrued were immediately due and payable on the termination of the employment of

the relevant directors and senior management of the Group.

(ii) CIRe has made loans to certain subsidiary companies of the major shareholders of the Group with interest

rate charged in a range of 4% to 11% per annum. No loan balance was outstanding as at 31 December 2000

(1999: $Nil).

(iii) Certain related insurance companies of the Group ceded their Employees’ Compensation and Employer’s

Liability business under an excess-of-loss reinsurance treaty to an insurance pool (“EC Pool”) in which CIRe

has a 15% participation on a quota share basis. CIRe has been appointed as administrator of the pool and

receives a service fee of 1% of the inward reinsurance premiums written by the pool. The pool arrangement

has ceased with effect from 1 April 2000.

(iv) SINO-RE provided insurance broking services to and received brokerage fees for the services rendered

from certain related insurance companies of the Group.

(v) The Group has entered into agreements with a related securities company, which is a subsidiary company

of the major shareholder of the Group, in relation to securities broking service provided. Securities broking

fees are charged at a fixed rate of 0.25% of the securities value.

(vi) Employees of the Group participated in a defined contribution retirement scheme managed by a related life

insurance company of the Group who charges a management fee for the services rendered.

(vii) A subsidiary company of the major shareholder of the Group provided travel agency services to the Company

and the Group on a regular basis and charges a fee for the services rendered.

(viii) The Group entered into a number of insurance policies with a subsidiary company and certain related

companies of the major shareholders of the Group to cover their business risk in relation to fire, property,

vehicle, personal accident, workmen compensation, group life and medical, electronic equipment and

professional indemnity.

(ix) CIRe and other related companies established Dragon Jade Industrial District Development (Shenzhen)

Co., Ltd., a wholly foreign-owned joint venture enterprise pursuant to the relevant rules and regulations of

the PRC applicable to enterprises with foreign investment to develop and operate an industrial property

complex in Shenzhen, the PRC in 1992 in which CIRe has a 20% equity interest.



30 CONNECTED TRANSACTIONS (Continued)

Notes: (Continued)

(x) CIHK, being the major shareholder of the Group, is the current owner of the China Insurance logo. Pursuant

to a non-exclusive licence agreement entered into between CIHK and the Group, the Group has obtained

the right to use such logo for an indefinite term at no consideration.

(xi) CIRe made an unsecured loan to a company which was jointly established by certain related parties of the

Group. The loan is interest-free and for an indefinite period. The outstanding balance as at 31 December

2000 was $4,830,000 (1999: $4,830,000).

(xii) CIRe provided guarantees to secure general banking facilities granted to subsidiary companies of the major

shareholder of the Group and pledged a bank deposit of $10,000,000 as at 31 December 1999 as collateral.

Subsequent to 31 December 1999, such guarantees were cancelled and the related pledge was released.

As a result, no such guarantees were outstanding as at 31 December 2000 in this regard.

(xiii) As part of the reorganisation as stated in note 1(b), certain assets of the Group were disposed of to the

shareholders of the Group and a subsidiary company of the major shareholder of the Group at their carrying

values totalling $69,303,746. As at 31 December 1999, the unsettled balances in relation to the disposal

were $69,303,746 which have been subsequently settled on 2 June 2000. As a result, no such balances

were outstanding as at 31 December 2000 in this regard.

Apart from the above, there were no other material connected transactions entered into bythe Group during the year.

In the opinion of the executive directors, the above transactions with the related parties wereconducted on normal commercial terms and in the ordinary course of business and haveconfirmed that the above transactions will continue in the future.

31 ULTIMATE HOLDING COMPANY

The directors consider the ultimate holding company as at 31 December 2000 to be ChinaInsurance Company, Limited which is established in the PRC.

FOUR YEAR FINANCIALSUMMARY(Expressed in Hong Kong dollars)


Results 2000 1999 1998 1997$ $ $ $

Turnover 691,044,279 644,314,317 742,464,454 765,606,810

Reinsurance business

Amount transferred from/(to)revenue account 73,180,019 (45,992,880) 73,390,299 91,154,792

Brokerage business 7,591,722 4,183,342 3,737,861 3,378,884

Other revenue 87,522,848 80,381,045 77,457,596 81,372,972

Other net (loss)/income (16,451,914) 75,282,605 (10,636,528) 3,220,084

151,842,675 113,854,112 143,949,228 179,126,732Expenditure relating to

non-underwriting activities (33,028,184) (8,668,818) (40,970,318) (97,912,190)

Profit from ordinary activitiesbefore taxation 118,814,491 105,185,294 102,978,910 81,214,542

Taxation (1,084,847) (3,292,000) (11,395,354) (12,092,721)

Profit attributable toshareholders 117,729,644 101,893,294 91,583,556 69,121,821

Assets and liabilities

Fixed assets 188,131,677 192,769,485 225,829,967 256,764,341Investments in securities 1,150,092,525 1,043,082,886 796,093,183 721,891,584Amounts due from related

parties — 69,303,746 — —Interest in associates — — 5,888,160 5,888,160Interest in joint ventures — — 88,457,893 106,837,177Trade and other receivables 305,619,361 246,127,972 269,125,607 321,522,421Pledged deposits at bank 17,522,378 31,522,024 42,187,049 —Cash and cash equivalents

and deposits at bank withoriginal maturity morethan three months 440,019,987 288,996,787 390,055,276 410,617,858

Total assets 2,101,385,928 1,871,802,900 1,817,637,135 1,823,521,541Less: Total liabilities (1,146,092,905) (1,327,956,341) (1,248,860,741) (1,286,639,807)

955,293,023 543,846,559 568,776,394 536,881,734

Share capital 44,687,400 601,000,000 301,000,000 301,000,000Reserves 910,605,623 (57,153,441) 267,776,394 235,881,734

955,293,023 543,846,559 568,776,394 536,881,734

Earnings per share

Basic 15 cents 15 cents 14 cents 10 cents

Diluted 15 cents N/A N/A N/A

FOUR YEAR FINANCIALSUMMARY



Note: The Company was incorporated in Hong Kong with limited liability on 18 February 2000 under the Hong Kong

Companies Ordinance and through a reorganisation became the holding company of the Group on 26 May 2000.

The Group has been treated as a continuing entity and accordingly the combined accounts for the four year

financial summary have been prepared on the basis that the Company was the holding company of the Group for

four years presented, rather than from 26 May 2000. The results of the Group for the years ended 31 December

1997 to 2000 include the results of the Company and its subsidiaries with effect from 1 January 1997 or since their

respective dates of incorporation, where this is a shorter period. The combined balance sheets as at 31 December

1997, 1998 and 1999 are combination of the balance sheets of all the companies comprising the Group as at 31

December 1997, 1998 and 1999 respectively. In the opinion of the directors, the resulting combined accounts give

a more meaningful view of the results and state of the affairs of the Group as a whole.


UNAUDITED SUPPLEMENTARYFINANCIAL INFORMATION

MANAGEMENT OF RISKS

The Group have adopted prudent strategies and techniques which aim to effectively identify,

evaluate and manage risks for both reinsurance underwriting and investments.

(i) Underwriting activities

The Group’s reinsurance portfolio is made up of a mix of business spread across different

geographic regions and classes, with emphasis towards Asian countries and non-marine

property damage, marine cargo and hull and miscellaneous non-marine classes. In addition

to diversifying its portfolio, the Group does not actively seek acceptance of any liability

reinsurance business from customers operating outside of the Asia Pacific region, in particular,

the United States of America. In the Asia Pacific region, where there are core-markets of the

Group, liability reinsurance for motor, workers’ compensation and general third party liability

are written on a limited scale in order to provide customers with comprehensive reinsurance

services.

(ii) Retrocession

The Group purchases retrocession facilities in order to increase its acceptance capacity, to

diversify its risk exposure and to harmonize its net retention exposure to avoid any significant

adverse impact to its financial performance which may be caused by single or multiple

catastrophic losses. The retrocessionaires are chosen after careful consideration of their

reputation and credit worthiness. In assessing the credit worthiness of retrocessionaires, the

Group takes into account, among other factors, ratings and evaluation by recognized credit

rating agencies and brokers, their claims-paying and underwriting track record, as well as

the Group’s past transaction experience with them. The Group also spreads out the credit

risk by reinsuring with a number of retrocessionaires who are domiciled in many different

countries.



MANAGEMENT OF RISKS (Continued)

(iii) Catastrophe exposure

The Group closely monitors its aggregate exposure to natural catastrophic perils around the

world, and record down major catastrophic losses in a historical database. Aggregate exposure

is reviewed and analyzed on a regular basis. The catastrophic exposure of the Group is

protected by means of various excess of loss retrocession facilities which limits the Group’s

maximum net retained loss to a tolerable level.

(iv) Reserve adequacy

The Group is required under the Hong Kong Insurance Companies Ordinances to maintain

reserves to cover its estimated claims liability and the related settlement expenses. The

Group exercises great care and effort in setting up the reserves. The reserves are estimated

by the Group, using actuarial methods such as loss development methods and/or Bornhuetter-

Ferguson method. The adequacy of the reserves is regularly reviewed.

(v) Foreign currency

The Group underwrites business originating from many parts of the world. It is potentially

subject to currency fluctuation when claims are to be paid. The Group hedged the currency

risk by holding deposits in a number of currencies and by premium income generated from

the underwriting in the relevant foreign currency. The transfer of foreign currency exposure

through appropriate retrocession also provides the Group with additional hedging against

such currency fluctuation risk. Members of the senior management are dedicated to monitor

the book of foreign currencies held by the Group.



MANAGEMENT OF RISKS (Continued)

(vi) Investments

The Group’s investment policy emphasizes asset quality and liquidity. However, its investments

are subject to various exposures including market risks and credit risks, as well as interest

rate risk. Prudent risk management procedures are in place with an aim to manage those

risks. Market risks are the risks that changes in interest rates, foreign exchange rates or

equity and commodity prices will affect the prices of monetary assets taken or held by the

Group. The adoption of held to maturity approach of the fixed income securities has provided

the Group with steady income and the composition of the investment portfolio is geared

towards stable recurrent income.


NOTICE OF THE ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the First Annual General Meeting of China Insurance International

Holdings Company Limited will be held at 24/F Ming An Plaza Phase II, 8 Sunning Road, Causeway

Bay, Hong Kong on 5 June 2001 at 11:00 a.m. for the following purposes:—

Ordinary Business

1. To receive and adopt the Audited Accounts of the Company for the year ended 31 December

2000 and the reports of the Directors and Auditors thereon.

2. To declare a Final Dividend.

3. To re-elect Directors.

4. To authorise Directors to fix the Directors’ remuneration.

5. To re-appoint KPMG as Auditors and authorise the Directors to fix their remuneration.

Special Business

6. To consider and, if thought fit, pass the following resolutions as Ordinary Resolutions:—

(1) “THAT:—

(i) Subject to paragraph (iii) below, the exercise by the Directors of the Company

during the Relevant Period (as hereinafter defined) of all the powers of the Company

to allot, issue or otherwise deal with any unissued shares in the capital of the

Company and to make or grant offers, agreements, options and other rights or

issue warrants which may require the exercise of such powers be and is hereby

generally and unconditionally approved;

(ii) the approval in paragraph (i) above shall authorise the Directors of the Company

during the Relevant Period to make or grant offers, agreements and/or options

which may require the exercise of the powers of the Company referred to in that

paragraph at any time during or after the end of the Relevant Period;



(iii) the aggregate nominal amount of unissued shares in the capital of the Company

which may be allotted, issued or otherwise dealt with by the Directors of the

Company during the Relevant Period pursuant to paragraph (i) above, otherwise

then pursuant to a Rights Issue or the exercise of subscription rights attaching to

any warrants issued by the Company, shall not exceed the aggregate of 20 per

cent, of the aggregate nominal amount of shares in the capital of the Company in

issue as at the date of passing this resolution;

(iv) for the purpose of this resolution:—

(a) “Relevant Period” means the period from the passing of this resolution until

whichever is the earlier of:—

(1) the conclusion of the next Annual General Meeting of the Company;

(2) the expiration of the period within which the next Annual General Meeting

of the Company is required by the articles of association of the Company

or by law to be held; and

(3) the revocation or variation of the authority given under this resolution by

an ordinary resolution of the shareholders of the Company in general

meeting; and

(b) “Rights Issue” means an offer of shares in the capital of the Company, or an

offer of warrants, options or other securities giving rights to subscribe for shares

in the capital of the Company, open for a period fixed by the Directors of the

Company, to holders of shares in the capital of the Company whose names

appear on the Register of Members of the Company on a fixed record date in

proportion to their holdings of shares (subject to such exclusions or other

arrangements as the Directors of the Company may deem necessary or

expedient in relation to fractional entitlements or having regard to any

restrictions or obligations under the laws of or the requirements of any

recognised regulatory body or any stock exchange).



(2) “THAT:—

(i) subject to paragraphs (ii) and (iii) below, the exercise by the Directors of the

Company during the Relevant Period (as hereinafter defined) of all the powers of

the Company to purchase Shares on The Stock Exchange of Hong Kong Limited

be and it is hereby generally and unconditionally approved;

(ii) the aggregate nominal amount of Shares which may be purchased pursuant to the

approval in paragraph (i) above shall not exceed 10 per cent of the aggregate

nominal amount of the share capital of the Company in issue at the date of passing

this Resolution, and the said approval shall be limited accordingly;

(iii) for the purpose of this Resolution:—

(a) “Relevant Period” means the period from the passing of this Resolution until

whichever is the earlier of:—

(1) the conclusion of the next Annual General Meeting of the Company;

(2) the expiration of the period within which the next Annual General Meeting

of the Company is required by the articles of association of the Company

or by law to be held;

(3) the revocation or variation of the authority given under this Resolution by

an ordinary resolution of the shareholders in general meeting; and

(b) “Shares” means shares of all classes in the capital of the Company and

warrants and other securities issued by the Company which carry a right to

subscribe or purchase shares of the Company.”



(3) “THAT, conditional upon the passing of Resolutions (6)(1) and (2) set out above granting

the general mandate to the Directors of the Company to exercise the powers of the

Company to allot, issue and otherwise deal with shares in the capital of the Company

and to make, issue or grant offers, agreements, options and/or warrants which might

require the exercise of such powers be and is hereby extended by the addition to the

total nominal amount of share capital which may be allotted or agreed conditionally or

unconditionally to be allotted by the Directors of the Company pursuant to such general

mandate an amount representing the total nominal amount of shares in the capital of

the Company purchased by the Company pursuant to the exercise by the Directors of

the Company in accordance with Resolution (6)(2) above of the powers of the Company

to purchase such shares, provided that such amount shall not exceed 10 per cent of the

aggregate nominal amount of the share capital of the Company in issue at the date of

passing this Resolution.”

By order of the board

Tam Chiu Tai Richard

Company Secretary


Notes:

(i) A member entitled to attend and vote at the above meeting shall be entitled to appoint another person as his proxy,

or appoint up to two proxies if he holds two or more shares of the Company, to attend and vote for him in accordance

with the articles of association of the Company. A proxy need not be a member.

(ii) In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall

be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined

by the order in which the names stand in the register in respect of the joint holding.

(iii) To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed (or a

notarially certified copy thereof) must be deposited at 12/F, Ming An Plaza Phase II, 8 Sunning Road, Causeway

Bay, Hong Kong not less than 48 hours before the time appointed for the holding of the above meeting or any

adjournment thereof.

(iv) The Register of Members will be closed from 30 May 2001 to 5 June 2001 inclusive during which period no share

transfers can be registered.

annual report 2000 - cntaiping · ng yu lam kenneth registered office 12/f, ming an plaza phase ii...

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