Monthly Archives: 4月 2018

Channels are becoming wider, insurance funds are actively deploying debt-to-equity swaps

Recently, the National Development and Reform Commission, the Central Bank, the Banking Regulatory Commission, the Ministry of Finance, and the five ministries and commissions of the State-owned Assets Supervision and Administration Commission jointly issued the “Working points for Reducing Enterprise Leverage in 2018″, which mentioned the support of eligible banks and insurance institutions. At present, the insurance institution’s debt-to-equity swap business mostly adopts the method of acquiring a non-performing asset management company. According to industry insiders, the debt-to-equity swap business meets the requirements for insurance liability management, and the insurance into the bond-to-equity swap business has a natural advantage. However, as the supporting policies have yet to be further clarified, the insurance enterprise’s debt-to-equity swap business experience is insufficient, and the pace of the establishment of debt-to-equity swap institutions by insurance companies will not be too fast. Industry insiders suggest that in order to further strengthen the breadth and depth of insurance funds to participate in market-oriented debt-to-equity swaps, they should be promoted jointly from the regulatory level and the company level.

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Insurance enterprise layout debt swap

At present, the state-owned big bank has basically set up a financial asset investment company (AIC). Under the favorable policies, insurance companies are expected to set up special debt-to-equity swap institutions. previously, insurance institutions have already invested in debt-to-equity swaps through non-performing asset management companies. The data shows that seven insurance institutions including China Life Insurance, ping An Life Insurance and Happy Life Insurance have successfully acquired 8 non-performing asset management companies.

In July of this year, China property Reinsurance and China Land property Insurance, as strategic investors, jointly subscribed for 6.5% of China Great Wall Asset Management Co., Ltd., and China Re p&C Insurance and Dadi property Insurance contributed RMB 2.8 billion and RMB 2.2 billion respectively.

In addition, China Life holds 6.71% of China Huarong and 1% of Great Wall Assets; China Life Insurance holds 10% of Guangxi Jinkong Asset Management Co., Ltd.; ping An Life holds Shenzhen Merchants ping An Asset Management Limited 39% of the company’s equity; ping An Dahua Fund participates in Qinghai AMC and Huarong Jinshang Assets as a limited partner (Lp); Happiness Life Shares in Shandong Financial Asset Management Co., Ltd.; Soochow Life holds 8.33% of Suzhou Asset Management Co., Ltd. Equity.

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The industry believes that although insurance institutions have their own asset management companies, they have insufficient experience in disposing of non-performing assets. The insurance company actively participates in the non-performing asset management company, which is to prepare for the accumulation of bad assets disposal experience and to set up a special non-performing asset management implementation organization in the future.

Agreement on insurance liability management requirements

There are natural advantages in the participation of insurance funds in the debt-to-equity swap business. An insurance asset management agency believes that market-based debt-to-equity swap projects tend to be long-term, generally more than three years, and the funds raised are large, especially when participating in debt-to-equity swap projects in the form of Lp, often requiring a single Lp to provide Larger funds, which coincides with the characteristics of long-term, large-scale and stable sources of insurance funds.

Compared with bank funds, although commercial banks are also characterized by large scale and stable sources, commercial banks have shorter term structure, and debt-to-equity swaps with longer maturity are prone to asset-liability mismatch problems of “short debt long-term investment”. .

Li Ruocheng, a researcher at Ningbo Dingyi Asset Management Co., Ltd., said that debt-to-equity investment is not only an innovation in the field of insurance equity investment, but also meets the basic requirements for insurance fund assets and liabilities management. In addition, as a new type of investment involving debts and then holding equity, debt-to-equity investment has the characteristics of low intervention cost and high expected return, which is conducive to improving the investment income of insurance funds.

participation in debt-to-equity swaps to be deepened

From the actual situation of the industry, the current insurance funds mainly invest in private equity funds related to debt-to-equity swap projects in the form of Lp. The common mode is that insurance asset management institutions use trust to participate in debt-to-equity swap projects.

According to industry insiders, for insurance institutions, the pace of setting up debt-to-equity swap institutions will not be too fast. on the one hand. As the insurance industry supporting policies have yet to be further clarified, especially the lack of further clarification on the participation forms of insurance funds in the debt-to-equity swap, product approval, proportional restrictions, preferential measures, etc., this makes most insurance institutions still on the sidelines; On the one hand, the relevant experience of insurance institutions is lacking, and it is more cautious to participate in the debt-to-equity swap business. Not only the insurance organization’s business team in the disposal of non-performing assets is almost not built, but also the bargaining power and due diligence ability of assets related to debt-to-equity swap projects. There is still a lack of mature business experience in investment management capabilities and post-investment management capabilities. These two factors have made the insurance institutions less powerful in their debt-to-equity swaps Adjuvant Capecitabine .

The above-mentioned insiders believe that in order to further strengthen the breadth and depth of insurance funds participating in market-oriented debt-to-equity swaps, they should be promoted jointly from the regulatory level and the company level. At the regulatory level, the implementation of the rules for encouraging insurance funds to participate in the market-oriented debt-to-equity swap should be introduced as soon as possible, and internal coordination should be strengthened to further introduce relevant incentive policies. It is necessary to further simplify the administration of power and appropriately relax the investment fields and scope limits of insurance funds. In addition, it is necessary to rely on the China Insurance Investment platform to explore the establishment of a market-oriented debt-to-equity special investment fund.

At the company level, insurance institutions should fully grasp the opportunities and obligations brought by the market-oriented debt-to-equity swaps to the insurance funds, and establish a screening process for the implementation targets that meet the insurance fund attributes. While increasing the innovation of insurance asset management companies to participate in market-oriented debt-to-equity swaps, strengthen the risk management of market-oriented debt-to-equity swap projects. In addition, it is necessary to strengthen cooperation with local governments and commercial banks, explore the feasibility of jointly establishing a non-performing asset disposal management company, and increase the construction of a debt-to-equity swap business team.

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