The Notice of State Taxation Administration of The People's Republic of China, Ministry of Finance of People's Republic of China (PRC) on Pre-tax Deduction of Insurance Funds (Caishui [2005] 136) stipulates that in order to effectively prevent and resolve financial risks, maintain financial stability and protect the interests of policyholders, the pre-tax deduction of insurance funds paid by insurance companies in accordance with the Measures for the Administration of Insurance Funds is hereby clarified as follows:

(1) The insurance guarantee fund paid by an insurance company in accordance with the following provisions shall be deducted according to the facts before tax.

1. Property insurance, accident insurance and short-term health insurance business shall not exceed1%of the retained premium;

2. Long-term life insurance and long-term health insurance with guaranteed interest rate shall not exceed 0.15% of the retained premium;

3. Long-term life insurance and long-term health insurance without guaranteed interest rate shall not exceed 0.05% of the retained premium;

4. Other insurance businesses shall not exceed the proportion stipulated by the China Insurance Regulatory Commission.

(2) Under any of the following circumstances, the insurance guarantee fund paid by the insurance company shall not be deducted before tax.

1. The balance of insurance guarantee funds of property insurance companies, comprehensive reinsurance companies and property reinsurance companies reaches 6% of the company's total assets;

2. The balance of insurance guarantee funds of life insurance companies, health insurance companies and life reinsurance companies reaches 1% of the company's total assets.

The insurance protection fund shall be managed centrally, and diseases shall be used as a whole under the following circumstances:

1. When an insurance company is revoked and declared bankrupt, it provides relief to the insured and the insured.

2. When an insurance company is revoked or declared bankrupt, it shall provide relief to the insurance company that accepts its life insurance contract according to law.

3. Other circumstances stipulated by the State Council.

Basis: People's Republic of China (PRC) Insurance Law.