Performance Review

Performance Review
I. Business Performance Overview
After fulfilling the target of eight-fold increase in three years, SINOSURE entered a period of steady development in 2006. Business volume kept increasing at a sustainable and rapid pace, and more and more people
got to know export credit insurance. Since its foundation five years ago, SINOSURE has supported USD72.54
billion worth of exports and overseas investments, earned USD980 million in premium, and paid a total of
USD540 million in claims. The size of its clientele had gone up from a few hundreds to several thousands by the
end of 2006, with notable increases in the developed coastal areas as well as the Central and Western
regions.
Note: 1. Due to factors such as differing statistical methods and exchange rates, there may be minor
discrepancies between certain business data and financial data.
2. Short-term insurance refers to short-term export credit insurance, and medium- and long-term
insurance refers to medium- and long-term export credit insurance, and domestic insurance
refers to domestic trade credit insurance.
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SINOSURE insured export project of
Fujian Tanker construction.
Overview of Five Years’ Performance
Sum Insured
USD’000
Premium Written
USD’000
Claims Paid
USD’000
2002
2003
2004
2005
2,752,141
5,714,150
13,297,881
21,213,135
29,567,487
54,644
100,172
192,252
277,834
359,754
69,973
97,509
98,740
110,123
168,618
82,450
115,480
100,800
165,000
286,044
2006
Investment Income
RMB’000
ANNUAL REPORT 2006
15
Overall Business Performance in 2006
The year of 2006 saw yet another rapid increase in all lines of businesses of SINOSURE. The amount insured
totaled USD29.57 billion, which represented an increase of USD8.35 billion over that of the previous year and
a year-on-year growth rate of 39.4%. It also raked in USD360 million in premiums in 2006, up 29.5% from the
previous year. The amount insured by SINOSURE made up 3.0% of China's total exports in 2006, an increase of
0.2% than the previous year.
Unit: hundred million U.S. dollars
Insurance Business Breakdown by Products
350
300
250
200
150
100
50
0
Total
Short-term
Insurance
Medium- and
Long-term
Insurance
Investment
Insurance
Year/2006
Bond and
Guarantee
Domestic
Insurance
Year/2005
Year/2004
SINOSURE continued to play an active role in improving China’s export commodity structure by vigorously
supporting the export of machinery-and-electronic products, high- and new-tech products and agricultural
products. In 2006, machinery-and-electronic products and high- and new-tech products underwritten by
SINOSURE totaled USD16.29 billion, accounting for 55.1% of its aggregate insured amount, agricultural products
underwritten totaled USD1.82 billion, accounting for 6.2% of its aggregate insured amount.
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Short-term Export Credit Business
In 2006, short-term export credit business continued to grow rapidly. The amount insured totaled USD23.32
billion, a year-on-year rise of 37.3%. Premium income reached USD170 million, a rise of 38.2%. Claims paid
totaled USD52.03 million, up 11.8%. Recovery amounted to USD7.40 million, up 46.6%. SINOSURE covered
exports to 167 countries and regions with its short-term insurance, of which the top five were United States,
Hong Kong, Japan, Germany and Cuba, accounting for 48.5% of the total amount insured.
Short-term Business Breakdown by Commodity
Short-term Business Breakdown by Continent
Light industrial products
47.8%
Machinery and electronics
41.5%
Agricultural and forestry products
7.5%
Other products
3.2%
Asia
35.4%
North America
29.1%
Europe
22.4%
Latin America
7.5%
Africa
3.1%
Oceania
2.5%
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Altogether 717 cases were paid out in 2006, the total amount of paid claims was USD52.03 million, involving 75
countries and regions, among which the United States, Brazil, India, Hungary and United Kingdom made up 62.6%
of the total payment. Claims paid due to protracted default totaled USD43.15 million, accounting for 83.1% of
the total.
Short-term Paid Claims Breakdown by Cause of Loss
Default
83.1%
Bankrupt
11.0%
Refusal on delivery
4.8%
Political risks
1.0%
Others
0.1%
Short-term Paid Claims Breakdown by Country(Region)
United States
27.8%
Brazil
10.7%
India
9.9%
Hungary
8.0%
U.K.
6.2%
Others
18 2006
37.4%
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Medium- and Long-term Export Credit Business
In 2006, SINOSURE saw a smooth development in medium- and long-term export credit business. It continued
to support export of machinery-and-electric products and vessels.
SINOSURE underwrote 41 projects under the medium- and long-term business in 2006, with the amount insured
standing at USD2.61 billion, a year-on-year decline of 6.5%. The company chalked up USD150 million in
premiums, up 9.4%. Claims paid were USD26.75 million, a rise of 2.6%. Recovery was USD28.50 million, down by
6.0%.
Seventeen Buyer Credit projects were under written with the aggregate sum insured totaling USD810 million,
accounting for 31.9% of the total. Twenty-four Supplier’s Credit projects under written with the aggregate
amount insured reaching USD 1.74 billion, making up 68.1% of the total.
By the end of 2006, the outstanding liability of medium- and long-term insurance was USD9.85 billion. Sudan,
Pakistan, Iran, the Philippines, and Cuba were the top five exposure countries.
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Medium-and Long-term Outstanding Liability Breakdown by Continent
Asia
48.9%
Africa
29.4%
Latin America
13.0%
8.7%
Europe
Medium-and Long-term Paid Claims Breakdown by Country
Zimbabwe
37.9%
Myanmar
28.1%
Jordan
21.1%
Laos
12.9%
Unit: hundred million U.S. dollars
Medium-and Long-term Business Breakdown by Products
20
18
16
14
12
10
8
6
4
2
0
Buyer Credit
Insurance
Supplier's Credit
Insurance
Year/2006
20 2006
Refinacing
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Year/2004
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Investment Insurance
Investment insurance business made a great breakthrough in 2006 with significant growth in business volume.
Focusing on China’s “Going Global” Strategy, overseas resource exploration and bilateral economic cooperation with other countries, SINOSURE supported the investment activities of more than 20 enterprises in 10
countries.
In 2006, SINOSURE handled 25 investment insurance cases, including 22 newly written policies and 3 renewed
ones. The aggregate amount insured was USD2.58 billion, a year-on-year rise of 394.2%, and the premiums
totaled USD 27 million, a rise of 327.8%. By the end of 2006, the outstanding liability of investment insurance was
USD2.79 billion.
Bond and Guarantee Business
SINOSURE adjusted Bond and Guarantee Business in 2006, paying great attention to enhancing business
quality and controlling business volume. It focused on export projects of high- and new-tech products and
provided finance facility to small- and medium-sized enterprises. The link between bond and guarantee
business and insurance business was strengthened. In 2006, the bond and guarantee increased by USD 710
million, raking in a premium income of USD 8.31 million. Four non-financial guarantee deals were done with a
total liability of USD21.69 million and 31 financial guarantee deals were done with a total liability of USD690
million. By the end of 2006, the outstanding liability of bond and guarantees business was USD 650 million.
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SINOSURE provided guarantee service for one cotton export project in Xinjiang province.
New Business of Bond & Guarantee Breakdown by Product
Product
Total
Financial Guarantee
Non-financial Guarantee
22 2006
Amount USD’000
Percentage (%)
714,831
100.0
693,143
97.0
21,688
3.0
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Unit: hundred million U.S. dollars
Comparison of New Business Bond & Guarantee by Calendar Year
10
8
6
4
2
0
Year/2003
Year/2004
Year/2005
Year/2006
Bond & Guarantee Business Breakdown by Industry
High- and New-tech Products
83.0%
Agricultural Products
12.0%
Ships
3.0%
Overseas Project Contracting
1.0%
Service Export
1.0%
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Domestic Trade Credit Insurance
As one of the new lines of business of SINOSURE, domestic trade credit insurance has made steady progress
since it was launched one year ago. It played a material role in enhancing business structure of SINOSURE and
helping SINOSURE provide full credit risk coverage to export enterprises.
The amount insured under domestic trade credit insurance during the year was USD340 million, and premium
was USD704,000. No claims occurred. By the end of 2006, the outstanding liability of domestic trade credit
insurance was USD58.21 million.
International Debt Collection Service
International debt collection service was launched to meet the growing needs of overseas and domestic
clients. It offers a new choice in overseas investigation and recovery of receivables in arrears. It also provides
agency service in bankruptcy registration and resale of goods. Consulting and professional training services
are also available.
In 2006 SINOSURE saw increases in international debt collection services. 401 cases were handled, with USD59.
33 million being involved. The amount of money recovered totaled USD3.65 million, a rise of 60.2% from the
year 2005.
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Comparison of Reovery Amount, 2003-2006 ( Unit: USD’000 )
4,000
3,500
3,000
2,500
2,000
1,500
1000
500
0
Year/2003
Year/2004
Year/2005
Year/2006
Recovery amount
ANNUAL REPORT 2006
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SINOSURE signed a Cooperation Framework Agreement with Promsvyaz Bank
(PSB) to support the Sino-Russian trade.
Credit Rating Service
Credit rating service provides professional services in credit investigation, industry and market reports, and
business management consulting. It helps enterprises to build up effective credit management procedures, to
evaluate their clients’ credit worthiness precisely, and to reduce the capital retrieval risk.
In 2006 SINOSURE provided nearly 50,000 credit reports on companies and industries to a group of international
credit insurance agencies, well-known multi-national corporations, and domestic enterprises.
SINOSURE made efforts in expanding its “Chinese Enterprises Credit Rating Database”. The database now has
information on approximately 5.77 million enterprises, of which about 400,000 enterprises are rated with
financial information for a succession of 4 years.
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Financing Convenience Scheme
In 2006 SINOSURE enhanced its function of providing financing convenience under export credit insurance by
deepening the cooperation with banks. It helped its clients raise a total of more than RMB 72 billion. By the
end of 2006, SINOSURE has established overall cooperation relationship with 30 banks, among which 18 are
Chinese and 12, foreign banks. It has helped enterprises to rise over RMB 190.2 billion from 68 banks under its
credit insurance schemes.
Export Credit Insurance Supported Financing Breakdown by Product
Short Term Business
36.9%
Medium- and Long-term Business
27.9%
Overseas Investment Insurance
27.7%
Bond & Guarantee Business
7.5%
ANNUAL REPORT 2006
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SINOSURE signed an Overall Strategic Cooperation Agreement with 17 automobile exporters respectively.
II. Management Overview
In 2006, SINOSURE reinforced its operating system in aspects of business management, financial management,
risk management and human resources management. SINOSURE speeded its pace of credit rating and IT
system construction. The company enjoyed a material improvement in the capability of administration and
quality of development.
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Business Management
SINOSURE enjoyed a steady and rapid growth in its overall business in 2006, through making good use of its
policy function, maintaining market-oriented operation, improving business administrative capability, boldly
innovating new products, and improving its service quality.
On the customer service front, sticking to the principle of “rooted in market and focused on clients”, SINOSURE
encouraged product innovation, and provided customers with products tailored to their needs and one-stop
services. SINOSURE improved its service quality and efficiency by means of modernized IT support. SNOSURE set
up tailor-made underwriting procedure and established a system of convenience channel and quick response in the areas of underwriting, buyer’s credit investigation, credit limit approval, and claim handling and
debt collection. The company succeeded in attracting lots of quality and key clients.
As for cooperation with banks, SINOSURE reinforced the function of financing facility, enlarged cooperation
scope, and offered more efficient financing solutions for enterprises.
On the product development front, SINOSURE revised clauses in short-term comprehensive policy, improved
premium quotation model and business management system, and made new progress in underwriting service
exports such as software and video & film products.
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Risk Management
After 5 years of exploration and development, SINOSURE has established a sophisticated and comprehensive risk
management system. The system is organized in a structure of Risk Management Committee, risk management
department and related departments. The system focuses on global political and economic risk, the Company’s
overall risk exposure, and respective exposure of individual products. The system is run through close intercorrelation among risk analyses, warning, control and diversification.
In 2006, SINOSURE published the new version of Handbook of Country Risk. The Company developed an institutionalized mechanism of monitoring hot issues and possible emergencies. It can help forewarn important market
risks, such as trade barriers, and work out effective countermeasures. SINOSURE pushed forward the cooperation
with international re-insurers and achieved an orderly improvement of its reinsurance business.
Financial Management
In 2006 on the financial management front, SINOSURE concentrated on supporting business development
and stressed the profitability. Via the amelioration of internal financial and accounting regulations, SINOSURE
stood on a firmer base for financial and accounting management. With the guiding function of financial
budgeting, income and expenses were under better control. By means of assets trusteeship, the quality of
capital and fund calculation was improved. With the enforcement of actuarial system on reserves for longterm claims, SINOSURE enjoyed a more reasonable reserve. Through stringent financial administration and
supervision over nationwide branches, SINOSURE enhanced the standardization of the financial management.
30 2006
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Capital and Fund Management
In 2006, SINOSURE continuously improved the internal control of capital and fund management. The company
improved capital and fund utilization regulations, introduced assets trustee mechanism, engaged in researches
matching assets and liabilities, strengthened cash flow management, and achieved better control and
supervision over investment risks.
Along with the company’s business development, its utilization of capital grew steadily. By the end of 2006,
SINOSURE had utilized RMB 7.76 billion, a year-on-year growth of 29.8%. The return of the capital hit RMB 290
million, an increase of 73.7%, and the average return rate of the capital reached about 5.2%, an increase of 45%.
Asset Management
SINOSURE redoubled efforts to protect its assets in 2006. Based on the construction of the contingent assets
information management system, it further established an information management system for handling
assets gained from debt collection. SINOSURE gradually realized a standardized management in the contingent assets and assets gained from debt collection.
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Information Resource Management
In 2006, SINOSURE intensified efforts to promote information resource exploitation and utilization, and greatly
expanded the country information database and enterprise information database. Various kinds of IT platforms were optimized, the information security was strengthened, and the office automation system was
operated efficiently.
The promotion of “SINOSURE Online”platform made breakthrough. By the end of 2006, 88.3% of the company’s
clients had adopted the online platform, as compared with 43.0% at the end of 2005. 36,514 applications for
credit limit were submitted online, accounting for 54.2% of the total. 230,552 declarations were submitted
online, with the value accounting for 45.4% of the total.
"SINOSURE Online" credit limits application trend
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1000
500
0
Number of on-line
credit limit Applications
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"SINOSURE Online" declaration of shipment trend
40000
35000
30000
25000
20000
15000
10000
5000
0
Number of on-line
Declarations
"SINOSURE Online" cover ratio trend
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
Percentage of Number of
Credit limit
Percentage of Number of
Declaration
Percentage of On-line
Subscribers
ANNUAL REPORT 2006
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SINOSURE communicated with international financial institutions.
Human Resources management
In 2006, SINOSURE impelled in full sail the specialization of its personnel. The Company highlighted the recruiting of well-educated human resources, reinforced the management for underwriters, client managers and
other key positions, carried out a shift program for senior employees in various positions, continuously implemented the award system encouraging employees to devote to the development and innovation of SINOSURE,
and published its first human resources valuation report on all employees.
By the end of 2006, SINOSURE had 795 employees on its payroll, 38% of whom had obtained postgraduate or
doctorial diplomas while 52% were college undergraduates. Over 90% of the employees had an educational
background in the areas of international trade, finance, insurance, law and foreign languages.
In organizational structure, SINOSURE adjusted the headquarter settings with three new functional departments created, effectively matching the organizational structure with the business development needs.
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Corporate Culture Development
SINOSURE aims to be the largest credit insurance group in China, a first-class credit insurance agency in the
world, and a modernized financial institution staffed with first-class professionals. It called on employees to be
more oriented to national interests, innovation, service, teamwork, market, and integrity, and to carry forward
the spirit of learning, openness, harmony, and devotion. It stipulated and implemented the SINOSURE Enterprise Culture Building Compendium. It organized various activities on corporate culture development.
International Exchange and Cooperation
In 2006, SINOSURE actively conducted cooperation and exchange activities with international counterparts.
The Company attended the Committee Meetings in Hong Kong and the Annual General Meeting in
Amsterdam, Netherlands. It has signed Agreement of Cooperation or Memorandums of Cooperation with 7
other ECAs such as OeKB (Austria) and SACE (Italy). It held bilateral business exchange meetings with KEIC
(Korea) and NEXI (Japan). In addition, SINOSURE hosted activities of exchanging business opinions with ECGC
(India), HKEC (Hong Kong), and VDB (Vietnam).
ANNUAL REPORT 2006
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36 2006
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III. Outlook for 2007
Business forecasts
The year of 2007 sees a rare opportunity for credit insurance. The development of domestic and global
economy will create a huge demand for credit insurance. As world economy continues to maintain a rapid
growth momentum, along with an expansion of economic globalization, enterprises are calling for more risk
security to conduct international trade and investment. Also, governmental departments are paying more
attention to export credit insurance’s function in promoting optimization of export structure, facilitating enterprises to ‘go global’ as well as ensuring economic and financial security. While the imbalance of China’s
international payments puts forward higher requirement but more opportunities to credit insurance, overall
open-up and mixed operation of the financial market poses more challenges to the credit insurance market.
Development goals
The year of 2007 is crucial for SINOSURE. In the year, it must open up new prospects and step up into a new
stage of development. SINOSURE has worked out its 11th five-year development strategic plan. As stated in
the plan, in order to create a sound foundation for the next two year’s development, SINOSURE will stick to the
scientific outlook on development, aim at “getting bigger, stronger and better”, maintain a balance among
development, construction and reform, and speed up development in adjustment and solidify foundations in
development, deepen reforms, improve corporate governance, strengthen competitive capability, and
enhance development quality.
Measures to take
To realize its development target and to give full play to its active role in promoting foreign trade and
economic cooperation and the ‘go global’ strategy, SINOSURE will boost discipline and standardization,
implement sophisticated management of business, finance, risk control, and human resources, strengthen
credit rating and information resource management, perfect governance system, intensify separate accounting of state and company accounts, launch diversified products to meet the clients’needs, develop
enthusiastically domestic trade credit insurance, push forward with the commercialization of medium- and
long term business, and realize “one-stop” service of all lines of its business.
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