Financial Services Association, January 4 (Reporter Xia Shuyuan) As an indispensable and important investment force in the capital market, the movement of insurance capital adjustments has attracted investors' attention. On January 4, Zijin Financial Insurance disclosed in the Insurance Industry Association an announcement regarding the listing of Huaguang Huaneng (600475.SH), showing that the company purchased 47.1947 million A-shares of Huaguang Huaneng through an agreement, accounting for 5.0012% of the listed company's A-share capital, reaching the listing line.

It is worth noting that in the past 2023, insurance capital listings showed a recovery trend. In terms of investment targets, insurance capital listing is also showing a new trend. The usual direction of heavy warehousing, such as real estate, “fell out of favor,” and industries that match the national strategy, such as environmental protection, new energy, and infrastructure, have become a new trend in insurance capital listing.

According to Cao Deyun, executive vice president and secretary general of the Insurance Asset Management Association, under the new accounting standards, insurance companies can use the equity method to account for long-term equity investments. Dividends during the holding period are included in investment income. Fluctuations in stock market value account for owners' equity and equity, and do not affect current profit performance.

According to Luo Xiaodong, a non-bank analyst at Galaxy Securities, in a low interest rate environment, increasing the allocation of equity assets is an important way to use insurance funds in the future. Industry insiders believe that with the introduction of steady growth policies and economic stabilization, industries such as scientific and technological innovation, advanced manufacturing, and new energy resources supported by the state are expected to rise in valuation, and insurance capital is expected to continue to increase the equity market layout in the future.

The first insurance capital listing in the beginning of the year! Zijin Insurance won more than 5% of Huaguang Huaneng's shares for 394 million yuan

After more than a year, Huaguang Huan was able to take strategic shareholder matters one step further.

On January 4, Zijin Financial Insurance announced the listing of Huaguang Huaneng in the Insurance Industry Association. According to the details, on January 2, Zijin Financial Insurance purchased 47,1947 million A-shares of Huaguang Huaneng through an agreement. This is also the first time that insurance funds will be listed on the market in 2024.

After participating in the above listing transaction, Zijin Financial Insurance held 47194,705 A-shares, accounting for 5.0012% of its total A-share capital. Based on the closing price of 10.63 yuan/share of Huaguang Huaneng A shares on January 2, Zijin Financial Insurance held a market value of 502 million yuan, accounting for 2.5% of Zijin Financial Insurance's total assets at the end of the third quarter of 2023.

As of September 30, 2023, Zijin Financial Insurance's total assets were 20.04 billion yuan, net assets were 9.317 billion yuan, and the comprehensive solvency ratio was 279.70%. As of January 2, the book balance of Zijin Financial Insurance equity assets was RMB 4.731 billion, accounting for 23.61% of total assets at the end of the third quarter of 2023.

According to reports, Huaguanghuanneng's equity change has been in progress for over a year. On August 25, 2022, Huaguang Huaneng disclosed information related to the share transfer for the first time. The controlling shareholder, Guolian League Group, plans to agree to transfer shares not higher than 25% of Huaguang Huaneng's total share capital through public solicitation from the transferee, totaling 236 million shares.

In May 2023, the League of Nations Group received application materials from three intended transferees: China State-owned Enterprise Structural Adjustment Fund Phase II Co., Ltd. (hereinafter referred to as “National Survey Fund Phase II”), China Electric Power Engineering Consulting Group Zhongnan Electric Power Design Institute Co., Ltd., and Zijin Financial Insurance.

In the end, the League of Nations Group identified the second phase of the National Survey Fund and Zijin Financial Insurance as the transferees of this public solicitation and transfer. On November 10, 2023, the League of Nations Group signed share transfer agreements with the National Survey Fund Phase II and Zijin Financial Insurance respectively. The two transferred 138 million shares and 47.1947 million shares of Huaguang Huaneng respectively, accounting for 14.6166% and 5.0012% of the total share capital. The transaction price was 8.35 yuan per share. The transfer prices for the second phase of the National Adjustment Fund and Zijin Financial Insurance were about 1.152 billion yuan and 394 million yuan respectively, for a total of about 1,546 billion yuan.

After the transaction is completed, the second phase of the National Accounting Fund and Zijin Financial Insurance will become the second and third largest shareholders of Huaguang Huaneng, respectively.

As of the close of trading on January 4, Huaguang Huaneng reported 11.3 yuan, an increase of 1.53%, with a total market value of 10.7 billion yuan. Compared with the transaction price of 8.35 yuan, this is a 35% increase. Judging from the current stock price, Zijin Insurance's transaction has already generated a profit of 139 million yuan.

Insurance capital is expected to increase its holdings in the equity market, and fields such as environmental protection, new energy, and infrastructure will become “well-off”

In fact, this move by Zijin Financial Insurance is only a microcosm of the equity market. After experiencing a lukewarm period from 2021 to 2022, insurance capital listing welcomed a recovery in 2023.

According to statistics from the Financial Services Association reporter, since 2023, insurance capital has been moving frequently in the secondary market. The number of listings has reached 9 times, which is significantly higher than the 1 time in 2021 and the 4 times in 2022.

According to reports, there was only one insurance listing in 2021, that is, China Life Insurance participated in China Huarong's non-public offering of H shares through QDII account funding.

Although insurance capital was listed 4 times in 2022, 2 cases were passive and did not involve insurer funding. Two other examples of active listing were China Taibao Joint Holdings subsidiary participating in the initial public offering of Tianqi Lithium's Hong Kong shares as a cornerstone investor and Taiping Life increasing its Hong Kong shares holdings of ICBC.

Entering 2023, there has been a marked increase in the enthusiasm of insurance companies to open a license. In January 2023, China Life Insurance increased its holdings and listed Wanda Information, and its shareholding ratio increased from 18.1674% to 20.3211%.

In February 2023, Sunshine Life subscribed for 253 million shares of Shicheng Holdings. After the subscription, it merged with related parties and co-actors Sunshine Financial Insurance to hold 456 million shares of Hong Kong shares of Firstrade Holdings, accounting for 6.05% of the total share capital, and was listed.

In March 2023, China Taibao and its subsidiaries participated in the listing of Everbright Environmental H shares, with a shareholding ratio of 5%. In June 2023, Great Wall Life unveiled Zhejiang Jiaotong Ke and Zhongyuan Expressway.

However, it is different from the trend of the real estate sector, which is heavily insured in 2020. Currently, some industries that match the national strategy, such as environmental protection, new energy, and infrastructure, are becoming the focus of insurance capital attention.

Take Zijin Financial Insurance and Huaguang Huaneng, as an example. The company mainly carries out integrated services such as design consulting, equipment manufacturing, engineering construction, operation management, and investment in the two major fields of environmental protection and energy. In the first three quarters of 2023, Huaguang Huan achieved revenue of 7.704 billion yuan, an increase of 27.39% over the previous year; net profit to mother was 515 million yuan, an increase of 3.52% over the previous year.

Xu Kang, chief analyst of the finance team at Huachuang Securities Research Institute, believes that insurance capital, as an important long-term capital, actively allocates equity at the right time will help invigorate the capital market and boost investor confidence.

It is worth noting that in 2023, the A-share market had ups and downs, and the ratio of insurance allocations to equity assets remained low throughout the year. According to the latest data from the General Administration of Financial Regulation, as of the end of November 2023, the balance of insurance stocks and securities investment funds was about 3.38 trillion yuan, accounting for about 12.37% of the balance of capital utilization, down about 0.34 percentage points from the end of 2022.

Looking ahead to 2024, insurance institutions have strong confidence in equity investment. Recently, the “Insurance Asset Management Industry Investment Confidence Index” released by the Insurance Asset Management Association shows that in terms of index judgment, the Shanghai and Shenzhen 300 Index, the China Securities 800 Index, the Shanghai Stock Exchange 50 Index, the GEM Index, and the Science and Technology Innovation 50 Index, insurance institutions' bullish expectations for 2024 and the first quarter of 2024 are basically the same.

Xu Yishan, an analyst at Fangzheng Securities, told the Financial Federation reporter that in the context of the new guidelines, the share of financial assets (FVTPL) measured at fair value and whose changes are included in current profit and loss has increased, the sensitivity of insurance investment to the equity market has increased, and equity investment can smooth returns. There are three main benefits to the current capital allocation of insurance capital:

The first is stable income. Direct access to the invested enterprise is carried out through equity investment, and the insurance capital directly shares or bears the profits and losses of the invested company. The current accounting statements do not reflect changes in the invested company's stock price, but only reflect the dividends or current profits of the invested company, so the capital for the new increase in stock investment will not cause significant fluctuations in the insurance company's performance in the short term.

The second is to increase profits. According to the “China Insurance Asset Management” study, there is a clear positive correlation between each company's annualized return on investment and the share of medium- to long-term stock investment in investment portfolios. The more long-term stock investment assets are allocated, the better the portfolio's return performance.

The third is to prolong the term. According to rough estimates from “China Insurance Asset Management”, for each 1% increase in long-term stock investment in the existing investment portfolios of listed insurers, the asset period can be extended by about 0.2 years.

Looking forward to the future, Xu Yishan said, “There is a high degree of compatibility between equity investment and insurance capital terms and income requirements, and it is expected that allocations will continue to increase in the future.”