By the end of October, China Life Insurance (601628.SH), China Ping An (601318.SH), China Pacific Insurance (601601.SH) three insurance rates are announced that the group intended to be a long-term investment to increase its stake in a subsidiary or joint venture.
According to the website of China Insurance Regulatory Commission, China Life Insurance (601,628, it shares), Ping An of China (601,318, it shares), China Pacific Insurance (601,601, it shares) in three of the Quarterly Bulletin published a few days before all the issued capital Notice . Among them, Ping An Life Insurance of its intention to increase the amount from 5,000,000,000 yuan to adjust to 20,000,000,000 yuan; China Life to be with the China Life Insurance (Group) Co. At the same time, the China Life Asset Management Limited with the ratio of capital; China Taibao is on the Life Taibao carry out capital increase, increasing to 1.6 billion shares of stock, the price increase to 5 yuan per share.
The Orient Securities analyst Wang Xiaogang believe that the increase in long-term equity investment, you can reproduce the effects of financial leverage, particularly in the current capital market in the doldrums of the period.
And the Central University of Finance and Economics president of the Insurance Institute of the implementation of his Su Hao believes that the current capital market conditions is not an ideal time, long-term equity investments in financial leverage will not be too obvious, but once the economic situation is good, for example, again like last year's Big bull market, the effect will be highlighted. In particular, China Pacific Insurance is a long-term equity investments in the proportion of the total capital reached 40%, the impact would be huge, and may even play a decisive role.
Reproduce leverage
Oct. 27, three insurance companies listed in the Quarterly Bulletin released by the three Sino-show: China Life's long-term equity investments as of September 30, 2008 to 8,643,000,000 yuan, representing 6,452,000,000 yuan at the end of 2007, an increase of 33.96 percent, mainly on the China Life Insurance Co., Ltd. due to capital; China Ping An's long-term equity investments as of September 30, 2008 to 5,212,000,000 yuan, compared with the end of last year's 2,207,000,000 yuan increased by 136.2 percent, increase its investment in the joint venture company; The parent company, China Pacific Insurance's balance sheet shows that its long-term equity investments as of September 30, 2008 of up to 22,702,000,000 yuan, the indicators for the end of last year 14,046,000,000 yuan.
China Pacific Insurance's parent company in the cash flow can be seen, as of September 30, 2008, "a subsidiary of investment, joint ventures and joint venture net cash payment of" up to 8,713,000,000 yuan, over the same period last year, the project is only 30.84 Billion, an increase of nearly 3 times.
In fact, the Center Daily News before the release also had a similar situation. China Pacific Insurance on August 21 announcement that the "consent of the China Pacific Insurance Asset Management (Hong Kong) Limited to set up the program to make the following changes: the company's registered capital from 35,000,000 to 50,000,000 HK Hong Kong dollar.
"The insurance companies leverage higher rate of return on investment impact, long-term equity investment is also true." Orient Securities analyst Wang Xiaogang told reporters. Last year, Ping An's equity investment is twice the net assets, leverage is obvious that this year dropped to 1 times, there will be no leverage. This year's increase in equity investment, you can reproduce the effects of financial leverage, particularly in the current capital market in the doldrums of the period.
To the general insurance industry-wide investment income to measure investment performance. Full return on investment with a total investment of the proceeds =% 2B Provision for impairment of assets to be sold,% 2B float movements surplus. It is clear that the long-term equity investment gains should be included in the full return on investment, and the full return on investment again a certain degree of impact on the ratio of net assets. Wang Xiaogang, according to estimates, in the third quarter of this year, China Life-wide investment yield 1.4%; -1.6% for the same period of peace; Taibao to -1.1%.
Guotai Junan Securities analyst Yu-Long Peng was to "leverage" expressed reservations. In his view, the insurance companies, long-term equity investment generally means an increase in investment by enterprises will have more money to expand their businesses.
In his view, the long-term equity investment will not see immediate benefits, not like stocks, bonds, as corporate investment has brought significant returns, but not all the financial period, there will be returns, "depends on the company's capital Kuogu Effectiveness of good and bad. "
Return period will get help
"Long-term nature of equity investment in the period is often difficult to see how many return, the real return period to see 5 to 8 years later." Ping An Securities, chief financial analyst Shao-chin said, "Of course, insurance returns Some will be relatively short period. "
According to the Quarterly Bulletin Third, China Life issue long-term equity investment is the provision of the insurance subsidiaries of the amount of capital. However, Chin Shao further explained that "China Life's insurance started last year, the relatively short time, along with the current market was not so good, is cut cycle, the insurance rate of return is not good people."
The relative insurance, life insurance because of their large amount of investment was a wide space in the industry generally agreed rate of return on investment is much higher, but the long return.
"The asset management company to recoup the investment will not say," China's Ping An in-house to the reporter explained that "Shidao good time, of course, as the big bull market in 2006, 2007, the group's net profit contribution Unprecedentedly large, this year's bear market is coming to shrink significantly, even as an investment loss of the initiator. "
China Reinsurance Group, a senior financial officer also confirmed to reporters that "the profits of insurance companies have come from investment in basic."
In his view, to take a different accounting method, long-term equity investment of the net assets of the impact will be different. "Cost Accounting and equity method of accounting results are very different." He said that the cost of law, the only long-term equity accounting earnings, not adjusted book value, net assets of the impact on some small; in under the equity method And long-term equity investment accounts to be the market value of the investment units, with the market's fluctuations, the impact on net assets will be greater.
He also said that "most of the insurance company's long-term equity investments in its total assets in a large proportion will not only leverage on effects occur when a role to play."
According to the Quarterly Bulletin III, as of September 30, 2008, China Ping An's total assets 666,385,000,000 yuan, of which long-term equity investments 5,212,000,000 yuan, accounting for only 0.78 percent over; China Life's total assets 946,418,000,000 yuan, of which long-term equity 8,643,000,000 yuan for investment, accounting for only 0.91 percent over; the China Pacific Insurance is a bit special, the total assets of 51,144,000,000 yuan, of which long-term equity investments 22,702,000,000 yuan, accounting for as much as 44.39 percent.
Now the ratio is still on the increase, insurance and so increase the size of the long-term equity investments, and the main focus in the insurance industry, on the one hand, as a result of the capital market in the doldrums, the need to secure more funding to find a way out of the investment; on the other hand Its weak economy in a positive adjustment of business structure, once the economic situation improves, financial leverage will also be highlighted.
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