Figure worm creativity/Photo courtesy of Chen Jinxing/Cartography
Securities Times reporter Liu Jingyuan
Recently,一线资讯 the news that China Life Insurance and New China Life Insurance intend to invest 25 billion yuan each to initiate the establishment of private equity funds has aroused widespread concern in the market.
In this regard, industry insiders and research institutions have analyzed that this means that insurance funds have added new ways to invest in the stock market. This innovative way aims to reduce the impact of market value fluctuation of equity assets on the net profit of insurance companies, help guide insurance funds to make long-term investment, and at the same time play the role of long-term funds in stabilizing the market and achieve win-win results for all parties.
The first private equity fund of insurance capital
According to the announcement made by China Life Insurance and New China Life Insurance on the evening of November 29th, the two parties intend to jointly set up a private equity investment fund in the form of company, tentatively named "Honghu Private Equity Investment Fund Co., Ltd.", with China Life Assets and Xinhua Assets setting up a limited liability company as fund managers to invest in the stocks of listed companies.
The scale of Honghu Fund is planned to be 50 billion yuan, with China Life Insurance and New China Life Insurance each contributing 25 billion yuan. The term of the fund is 10+N years. After the expiration of the 10-year period, it can be extended by changing the record, or it can be withdrawn after mutual agreement.
Judging from the information disclosed by both parties, the fund is a pilot fund. It is noteworthy that this is the first private equity fund directly invested by an insurance company. From the two categories of private equity funds, insurance funds were only allowed to invest in private equity funds, and direct investment in private equity funds has not been released. However, before that, there were cases where insurance funds were invested in private equity funds, which were often realized "indirectly" through investment.
Some people in the insurance industry analyzed with the Securities Times reporter that the pilot funds of China Life Insurance and New China Life Insurance have received certain policy support, and it is expected that the overall operation will be market-oriented.
Judging from the investment of Honghu Fund, according to China Life Information, the fund intends to invest in the stocks of high-quality listed companies with good corporate governance and stable operation, and conduct investment and operation according to the principle of marketization, grasp the opportunity to open positions according to the market situation, and dynamically optimize the strategy.
"As large life insurance companies, China Life Insurance and New China Life Insurance can invest in high-quality listed companies for a long time by jointly setting up funds, which can give full play to their investment advantages and is an innovation and attempt to further improve asset-liability management and optimize investment methods." China Life said.
Reduce the fluctuation of equity investment
Impact on the profits of insurance companies
"This time, the two companies jointly initiated the establishment of an investment structure of a private equity investment fund company. It is expected that the core purpose is to alleviate the fluctuation of the income statement." According to the analysis of the non-bank team of Guotai Junan Securities, it is expected that China Life Insurance and New China Life Insurance will focus on investing in the equity market and respond to the call of supervision under the background that the current supervision emphasizes financial ballast stones and guides long-term insurance funds to enter the market. Under the background of current equity market fluctuation, the equity investment of insurance companies intensifies the fluctuation of income statement, which is an important factor restricting equity investment.
Many research institutions believe that the two insurance companies will invest 50% each to set up corporate funds to invest in the secondary equity market. From the accounting measurement, they will be able to use long-term equity investment to avoid the impact of market value investment fluctuations on current profits.
The non-bank team of Guotai Junan Securities said that adopting the equity method to calculate the profits and dividends of private equity fund companies in proportion to the investment income can effectively alleviate the impact of direct investment in the secondary equity market on the statements under the new accounting standards.
Another research institution believes that China Life will implement the transition period of the old and new accounting standards until 2025. During this period, A/H shares of the company will implement two sets of standards, while A-shares will implement the old standards. For example, if stocks are included in AFS assets (available-for-sale financial assets) for sustained losses, they need to be depreciated. The establishment of this fund can avoid this situation and help to stabilize the fluctuation of income statement.
Realize long-term investment and stabilize the market.
For the above two insurance institutions to set up private equity funds, analysts believe that it will help insurance companies to enhance their equity investment and realize long-term investment, and at the same time release positive signals to stabilize the market.
"The decline in the fluctuation of the income statement will effectively solve the problem of the current fluctuation of insurance companies in the capital market and the low willingness to invest in equity assets under the implementation environment of the new accounting standards." According to the non-bank team of Guotai Junan Securities, as of the end of June 2023, New China Life Insurance's equity investment accounted for 24.6%, and China's life insurance equity investment accounted for 22.8%, which is still far from the upper limit of 30% for the two companies. It is expected that China Life Insurance and New China Life Insurance will have more room to increase the proportion of equity investment, so as to optimize the matching of assets and liabilities of life insurance companies and improve the efficiency of capital use.
Soochow securities Research Institute believes that the funds set up by China Life Insurance and New China Life Insurance intend to invest in the stocks of high-quality listed companies with good corporate governance and stable operation, which will help to release positive and stable market signals. It is expected that the operation will be similar to that of "stabilization funds", and the CSI 300 and SSE 50 will be the main investment targets.
Another research institution believes that if other companies follow up, it is expected to bring 100 billion yuan of incremental funds into the market.