Industry insiders believe that at present, insurance funds still have the enthusiasm to take stakes, and there is also considerable potential space for increasing the allocation of equity assets
Insurance companies' shareholding in listed companies remains active.
On August 13th, China Pacific Life Insurance Co., LTD. (hereinafter referred to as "CPIC Life Insurance") issued an announcement stating that the company and its related parties and concerted actors recently took a stake in the H shares of Guangdong Dongyangguang (600673) Pharmaceutical Co., LTD. (hereinafter referred to as "Dongyangguang Pharmaceutical").
According to statistics by a reporter from the Securities Daily based on public information, as of August 13th, the total number of times insurance funds have taken stakes in listed companies this year has reached 27. Industry insiders believe that in the future, there is still considerable room for insurance funds to increase their allocation of equity assets.
There is a strong willingness to increase holdings in listed companies
Taibao Life Insurance announced that on August 7th, Dongyang Pharmaceutical privatized its Hong Kong-listed subsidiary, Yichang Dongyang Changjiang Pharmaceutical Co., LTD. (hereinafter referred to as "Yichang Dongyang Pharmaceutical"), through an absorption merger by issuing new H shares (listed through an introduction) as the share exchange consideration, and converted the shares originally held by Taibao Life Insurance in Yichang Dongyang Pharmaceutical into shares at a certain proportion. Passively triggered this shareholding increase.
After this shareholding increase, Taibao Life Insurance directly holds approximately 6.0586 million H shares of Dongyang Pharmaceutical, accounting for 5.38% of the latter's H share capital. Taibao Life Insurance and its related parties and concerted actors hold approximately 7.546 million H shares of Dongyang Pharmaceutical, accounting for 6.70% of the company's H share capital.
From the perspective of the proportion of the book balance of equity assets to the total assets at the end of the previous quarter, Taibao Life Insurance announced that as of March 31, the book balance of equity assets of Taibao Life Insurance was 441.184 billion yuan, accounting for 19.88% of the total assets of Taibao Life Insurance at the end of 2024.
According to the statistics of the reporter, as of August 13th, the total number of times insurance funds have taken stakes has reached 27, which is far higher than the 20 times for the whole of last year. Among them, 25 times were triggered by active purchases, and 2 times were triggered by passive factors, reflecting the strong willingness of insurance funds to actively increase their holdings in listed companies this year. At the same time, in terms of the way of raising stakes, competitive bidding and secondary market purchases are the main methods. The main sources of funds for the shareholding increase are self-owned funds and insurance liability reserves.
Zhou Jin, the managing partner of insurance consulting at Tianzhi International Certified Public Accountants, told the Securities Daily that previously, the regulatory authorities issued an implementation plan, setting operational assessment standards for the proportion and stability of insurance funds from large state-owned insurance companies entering the A-share market. The weight of the assessment indicators for the 3-year and 5-year cycles reached 70%, effectively promoting the implementation of the long-term assessment mechanism. In addition, the State Financial Supervision and Administration Commission has adjusted the solvency rules, reducing the risk factor for stock investment by 10%, which is conducive to promoting insurance funds to increase their capital inflow into the market.
At present, confidence in the capital market is gradually recovering, and the valuation of the stock market has considerable room for improvement. Insurance companies need to seize the opportunity of the valuation low point to increase their allocation of equity assets. Meanwhile, insurance companies hope to achieve equity method accounting through shareholding increase, thereby reducing the volatility of current profits and losses. This factor will also lead to more shareholding increase behaviors by insurance companies.
Increase the allocation of equity assets
As insurance companies continuously increase their allocation of equity assets through means such as taking public stakes and increasing their holdings in listed companies, the proportion of equity assets of insurance funds has also gradually risen. Industry insiders believe that, on the whole, there is still considerable room for insurance funds to allocate equity assets at present, and it is expected that they will continue to increase their allocation in the future.
According to the classification of insurance funds' utilization, stocks, securities investment funds and long-term equity investments are the main equity assets of insurance funds. Data from the National Financial Supervision and Administration Commission shows that, from the perspective of the entire industry, as of the end of the first quarter of this year, equity investment by insurance companies accounted for approximately 20.6% of the total funds utilized.
Meanwhile, in accordance with the "Notice of the National Financial Supervision and Administration Commission on Adjusting the Regulatory Ratio of Equity Assets of Insurance Funds" issued in April this year, if the comprehensive solvency adequacy ratio of an insurance company at the end of the previous quarter exceeds 100%(including this figure, the same below) but is lower than 150%, the book balance of equity assets shall not exceed 20% of the company's total assets at the end of the previous quarter. At the end of the previous quarter, if the comprehensive solvency adequacy ratio exceeds 150% but is lower than 250%, exceeds 250% but is lower than 350%, and exceeds 350%, the proportion of the book balance of equity assets not exceeding the total assets of the company at the end of the previous quarter shall be 30%, 40%, and 50% respectively.
From the perspective of specific insurance companies, the announcement of Ping An Life Insurance Company of China (601318) Co., Ltd. shows that as of the end of the first quarter of this year, its comprehensive solvency adequacy ratio was 227.92%, and the upper limit of the corresponding equity investment ratio was 30%. As of the end of the first quarter of this year, the book balance of the company's equity assets accounted for 23.26% of its total assets at the end of last year.
Meanwhile, the comprehensive solvency adequacy ratio of China Post Life Insurance Co., Ltd. at the end of the second quarter of this year was 194.59%, and the upper limit of the corresponding equity investment ratio was 30%. As of the end of the second quarter of this year, the book balance of the company's equity assets accounted for 17.08% of its total assets at the end of the first quarter.
Considering the current solvency adequacy ratio of insurance companies, the equity investment ratio of most insurance companies is still far from the upper limit, and there is sufficient room for future allocation increases. Long Ge, deputy director of the Innovation and Risk Management Research Center of the University of International Business and Economics, analyzed to the reporter.
The industry insiders interviewed believe that at present, insurance funds' shareholding increase is both proactive and has considerable potential space. Taking into account the characteristics of insurance funds, the current capital market environment, and accounting standards, among other factors, insurance funds are expected to continue to increase their allocation of equity assets in the future.