Insurance capital rush: Ping An Life increases its stake in ICBC H shares, and Ping An Asset Management significantly increases its holdings in PSBC and CCB H shares

Once again, we see insurance funds increasing their stakes.

On December 31, 2024, Ping An Life announced that its entrusted Ping An Asset Management invested in the H shares of Industrial and Commercial Bank of China (ICBC) (01398.HK), reaching 15% of ICBC's H share capital on December 20, 2024, triggering Ping An Life's stake increase behavior according to Hong Kong market rules.

According to a reporter from Securities Times, in addition to the above operations, Ping An Asset Management, in its capacity as "investment manager," continuously increased its holdings in two bank stocks in mid-December, namely Postal Savings Bank of China and China Construction Bank, both of which are H shares.

Increasing Stake in ICBC H Shares

According to data disclosed by the Hong Kong Stock Exchange, Ping An Life purchased 45 million shares on December 20 at an average price of HKD 4.8718 per share, resulting in a holding ratio of 15%. On the same day, Ping An Group also purchased ICBC H shares through other subsidiaries, with a total purchase of 107 million shares, costing HKD 522 million, bringing the holding ratio to 15.11%.

In fact, since 2024, Ping An has repeatedly increased its holdings in ICBC H shares, having made purchases in June and August. After Ping An Group and Ping An Life increased their holdings on August 23, Ping An's holding ratio in ICBC H shares rose to 14%.

This stake increase was made by Ping An Asset Management through competitive trading, with funds sourced from Ping An Life's insurance liability reserves. Ping An Asset Management acts as the trustee for Ping An Life and is controlled by the same major shareholder, Ping An Insurance Group.

As of December 20, 2024, the book balance of ICBC H shares held by Ping An Life had reached RMB 58.321 billion, accounting for 1.26% of its total assets at the end of the third quarter of 2024.

As of September 30, 2024, Ping An Life's total assets were RMB 4.83 trillion, with net assets of RMB 317.613 billion, and a comprehensive solvency adequacy ratio of 200.45%; the book balance of the company's equity assets was RMB 885.9 billion, accounting for 19.81% of its total assets at the end of the third quarter of 2024.

Bank H Shares Continuously Increased

In addition to ICBC H shares being increased, Postal Savings Bank of China H shares and China Construction Bank H shares have also seen significant increases in funding recently.

According to information disclosed by the Hong Kong Stock Exchange, Ping An Asset Management increased its holdings of Postal Savings Bank of China H shares by 3.5 million shares on December 24, costing approximately HKD 16.4 million. After this increase, Ping An Asset Management, in its capacity as "investment manager," held a total of 994.25 million Postal Savings Bank of China H shares, accounting for 5.00% of the total H shares of the bank and over 1% of the bank's total equity.

Additionally, Ping An Asset Management increased its holdings of China Construction Bank H shares by 67.255 million shares on December 18, costing approximately HKD 424 million. After this increase, Ping An Asset Management, as an investment manager, held 12.054 billion China Construction Bank H shares, accounting for 5.01% of the total H shares of the bank and 4.82% of the bank's total equity The reason insurance companies are increasing their holdings in H-shares of banks may be due to factors such as low valuations in the Hong Kong stock market, high dividend strategies, and the stability of financial reports. The dividend yield of bank stocks in Hong Kong is generally high. According to the latest closing data, the dividend yield of ICBC H-shares reached 6.44%, while the dividend yield of CCB H-shares reached 6.77%.

On December 30, ICBC announced that it plans to distribute a semi-annual cash dividend of 0.1434 yuan per share (tax included), with a total cash dividend distribution of approximately 51.109 billion yuan. Among them, the cash dividend for A-shares totals approximately 38.662 billion yuan.

Since the beginning of 2024, high dividend strategies have received continuous attention from the market, with the high dividend yield and extremely low valuations of bank stocks becoming the preferred choice for funds. Driven by multiple factors, the bank stock market has welcomed a significant upward trend in 2024.

According to Wind statistics, nearly all A-share banks have been in an upward trend in 2024, with the annual increase in the banking sector (total market capitalization weighted average) reaching 46.67%, ranking first among Shenwan's primary industries. Specifically, 11 banks saw increases of over 50%, with Shanghai Bank, Hu Nong Commercial Bank, Pudong Development Bank, and Chengdu Bank seeing increases of over 60%. The banking sector of the Hong Kong Stock Exchange also performed well, with an increase of 61.02% in 2024 (total market capitalization weighted average).

Insurance Capital Shareholding Hits New High

A major characteristic of insurance capital investment in 2024 is the frequent triggering of the 5% shareholding threshold through secondary market purchases, with some companies making multiple shareholdings. According to the China Insurance Industry Association, insurance capital has reached 20 shareholdings this year, a new high in nearly four years, with 7 occurring since November.

Industry insiders analyze that, as representatives of medium- to long-term funds, insurance capital's frequent shareholdings in 2024 are partly in response to the call for medium- to long-term funds to enter the market, and partly related to the implementation of new financial instrument standards and the continuous decline in interest rates. By increasing investments in high-dividend stocks and expanding the scale of long-term equity investments, it is beneficial for promoting more stable returns and financial statements.

A head of an insurance asset management company told Securities China reporters that high-dividend assets are an important investment direction for insurance capital. In early October 2024, when market sentiment was high, the company increased its allocation to high-quality high-dividend stocks in the Hong Kong stock market, further expanding its long-term stock holdings.

This person also believes that not all high-dividend assets are suitable targets. The long-term allocation of insurance capital to high-dividend assets needs to focus on the following two aspects: first, high dividends need to be based on high profitability and have a certain degree of sustainability, so the profitability quality of listed companies must be relatively high, and profitability must be sustainable. It is not enough to simply look at the dividend yield; one must also consider the company's profitability (ROE, net profit margin, etc.) level and its sustainability. Secondly, the cost of buying high-dividend assets should not be too high. If the purchase cost is too high, it will reduce the dividend yield level, and there will also be the risk of losses from stock price adjustments in the future KaiYuan Securities analysis believes that the frequent stake acquisitions by insurance funds reflect a trend where life insurance companies enhance net investment returns by increasing holdings in mature industries with stable operations and continuous dividends in a low-interest-rate environment. It is expected that holdings above the 5% stake threshold will mainly be accounted for under the OCI stock category.

Changjiang Securities analysis suggests that the rebound in insurance fund stake acquisitions since 2023 is related to the overall environment, where long-term bond rates continue to decline and high-yield projects such as non-standard investments are shrinking, creating an "asset shortage." The purpose of multiple stake acquisitions may be to offset the losses from declining interest spread income and to smooth the impact of the interest rate decline cycle. Additionally, starting in 2023, some insurance companies are implementing the new accounting standard IFRS 9. According to IFRS 9, stocks that exceed 5% and obtain board seats can be accounted for under long-term equity investments using the equity method, which only affects total assets and does not impact the income statement and investment income, holding significant importance for smoothing insurance statements and investment returns.

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