China Post Life Insurance makes its first "stake" in nearly a decade, targeting Anhui Expressway, as dividend assets remain favored by insurance capital

Insurance funds have recently taken new actions.

On November 6th, China Post Life announced that it had acquired a stake in Anhui Expressway (0095.HK) on October 22nd, holding a total of 25 million H shares, accounting for 5.04% of the circulating share capital.

The announcement disclosed that based on the closing price on the acquisition date and the exchange rate, the book balance of China Post Life's shares in Anhui Expressway is approximately 226 million yuan, accounting for 0.04% of the assets at the end of the third quarter.

Data disclosed by the Insurance Association indicates that this is the first stake acquisition by China Post Life since 2015.

The renewed enthusiasm for equity financing may be related to the dividend asset allocation strategy under the switch in accounting standards.

Wind data shows that since 2014, the annual cash dividend ratio and dividend yield of Anhui Expressway have maintained a good level.

The dividend ratio has consistently remained above 35%, exceeding 60% in both 2022 and 2023; the dividend yield has remained above 4%, maintaining over 7% in the past two years.

As of the close on November 6th, the dividend yield of Anhui Expressway over the past 12 months is 7.26%.

As a typical "dividend asset," Anhui Expressway meets the asset allocation needs of China Post Life under the new accounting standards.

China Post Life is currently in the first year of the accounting standards switch.

In 2023, China Post Life's insurance business revenue crossed the "100 billion" mark, but it reported a "huge loss" of 11.468 billion yuan.

At that time, China Post Life explained that 11.21 billion yuan was caused by "significant increases in reserves due to fluctuations in the 750 curve."

The company's chief actuary, Jiao Feng, previously stated that there was a significant profit mismatch in life insurance under the old accounting standards, "reserves are based on the 750 curve, and changes in government bond yields take three years to reflect in the statements; the asset side either does not respond or overreacts."

Based on this, China Post Life will switch to the new accounting standards ahead of its non-listed peers starting in 2024.

While accurately reflecting changes on the liability side, the new accounting standards will also more directly present performance fluctuations on the asset side, requiring insurance companies to have dividend assets that can be included in FVOCI (other comprehensive income) to smooth performance.

Jiao Feng has stated that under the new accounting standards, the company will effectively utilize alpha strategies and high dividend strategies, leveraging the strategy application of equity investments classified as FVOCI under the new standards to reduce the impact of market volatility on operating results.

This stake acquisition in Anhui Expressway is a confirmation of this strategy.

Guangfa Securities believes that public utilities, railways, highways, ports, operators, and banks with licensing advantages currently have low bubbles and can continue to be held, "such industries are basically at reasonable or even slightly below pricing experience PB levels, without significant valuation bubbles."