Dongxing Securities: Reducing Risk Factors in Some Investment Businesses of Insurers to Further Release Insurance Capital Vitality

The Zhitong Finance App learned that Dongxing Securities released a research report saying that during the period when Sino-US economic and trade relations are facing major changes, the capital market has taken on greater responsibility for stability and development. At this point, the role of insurance capital as a “stabilizer” in the capital market is particularly important. This time, the supervisory authorities have reduced risk factors for some types of insurance capital investments. While promoting the steady and healthy development of the capital market, it is also expected to improve the efficiency of insurers' capital utilization and investment returns, thereby improving the operating performance of insurers. Furthermore, improvements in the capital market operating environment will also directly drive the release of brokers' performance.

Dongxing Securities's main views are as follows:

The General Administration of Financial Supervision issued the “Notice on Adjusting Risk Factors Related to Insurance Companies' Businesses”

Guide insurance companies to improve long-term investment management capabilities, strengthen asset liability matching management, make better use of the patient capital role of insurance funds, effectively serve the real economy, and promote the continuous and steady operation of insurance companies. This risk factor adjustment mainly includes two aspects: first, risk factors for the Shanghai and Shenzhen 300 Index constituent stocks, China Securities Dividend Low Volatility 100 Index stocks, and Science and Technology Innovation Board stocks invested by insurance companies, which are differentiated according to position time to cultivate and expand patient capital and support technological innovation; the second is to adjust the premium risk factors and reserve risk factors for insurance companies' export credit insurance business and the overseas investment insurance business of China's export credit insurance companies to guide insurance companies to increase their support for foreign trade enterprises and effectively serve the national strategy.

The anti-globalization process and the trade turmoil between China and the US have brought great unpredictability to the pace of domestic economic recovery

Specifically, the adjustment is divided into three points: 1) The risk factors for the Shanghai and Shenzhen 300 Index constituent stocks that have been held by insurance companies for more than three years and the China Securities Dividend Low Volatility 100 Index constituent stocks were lowered from 0.3 to 0.27. The position holding period is determined based on the weighted average holding time over the past six years; 2) The risk factor for common stocks listed on the Science and Technology Innovation Board for insurance companies that have held positions for more than two years was lowered from 0.4 to 0.36. The position holding period is determined based on the weighted average holding time over the past four years; 3) The premium risk factor for the insurance company's export credit insurance business and the Chinese export credit insurance company's overseas investment insurance business was lowered from 0.467 to 0.42, and the reserve risk factor was lowered from 0.605 to 0.545.

The bank believes that the anti-globalization process and the Sino-US trade turmoil since the beginning of the year have brought great unpredictability to the pace of domestic economic recovery, and capital market fluctuations have remained at a high level. At this critical point, long-term capital such as insurance capital and patient capital have become key factors in stabilizing capital market confidence and continuously supplementing capital market liquidity, and require continuous release of vitality with policy support. This time, the General Administration of Financial Supervision has reduced the risk factors for insurance capital investment in Shanghai and Shenzhen 300 Index constituent stocks, China Securities Dividend Low Volatility 100 Index constituent stocks, and Science and Technology Innovation Board stocks, which will effectively push insurance capital to speed up the market entry process and calm market fluctuations. The indices involved include the Shanghai and Shenzhen 300, the Dividend Low Wave 100, and the Science and Technology Innovation Board Index, which basically cover the main broad base and mainstream investment styles. The support is broad and strong. Whether it is large blue chips, high dividend dividends, or technological growth, it is expected to usher in fresh water, which is conducive to the balanced and healthy development of the equity market. In addition, this regulation has also targeted the risk factors for export credit insurance overseas investment business. It is expected to effectively promote business linkage between insurers and foreign trade enterprises, accelerate the development of advantageous domestic enterprises going overseas, and better serve national core strategies such as the “Belt and Road”.

Investment advice: Looking at investment targets, the current Matthew effect in the non-banking sector continues to increase, leading institutions in the industry have more ability and opportunity to participate in policy innovation, grasp the policy dividend window period, and improve their own operating performance. Therefore, it is recommended to continue to focus on the investment value of leading companies in the industry. Furthermore, in the context of the booming development of ETFs, due to differences in investment needs, the investment value of securities and insurance ETFs should also continue to be focused on.

Risk warning: macroeconomic downside risk, policy risk, market risk, liquidity risk.