This week in asset owner history: Ping An cuts stock holdings

In August 2018, Ping An Insurance stated it would lower its share of stocks in its portfolio as it aimed to adhere to IFRS 9. Its interim report released August 24 shows that the insurer has delivered on that promise.
This week in asset owner history: Ping An cuts stock holdings

On August 22 2018, Ping An Insurance became the first Chinese insurer to report interim results under new international accounting standards, revealing a greater degree of fluctuation in its numbers and a drop in its stock holdings.

“This (IFRS 9) has indeed increased the volatility of our investment income," Ren Huichuan, then-president of Ping An said in August 2018.

He then outlined Ping An's commitment to "continue to source quality and long-term equity investments to diversify risk and lower the impact of market volatility on us.”

Financial institutions globally had been required to follow International Financial Reporting Standards 9 (IFRS 9) since the start of 2018, but insurers could choose to adopt them no later than 2021.

On Wednesday (August 24), Ping An announced its interim results for 2022. Out of total investments valued at RMB4,270.8 billion ($622.3 billion) as of June 30 2022, stocks made up 6.1%, down from 7% as of December 31 2021.

Apart from a minor hike in 2019, allocation to stocks has followed a general trajectory that has seen it take up an increasingly smaller share of the total portfolio.

Ping An implemented IFRS 9 on its financial instruments in January 1, 2018. The insurer's insurance fund portfolio’s investment in financial assets carried at fair value through profit or loss accounted for 21.2% of the total investment assets as of June 30, 2022, according to the interim report.

Ping An also wrote that the investment income on its investment portfolio of insurance funds was under pressure in the first half of 2022 due to volatile capital markets. The annualised net investment yield was 3.9% (up 0.1 percentage points compared to 2021), and the annualised total investment yield was 3.1% (down 0.4 percentage points compared to 2021).

In terms of new investment calls, Ping An increased its allocation to tax-exempt bonds, such as central and local government bonds, and long-duration low-risk bonds, such as policy bank bonds, in response to challenges brought by lower interest rates and rising credit risk.

The insurer also increased its investment in alternative assets, especially rent-collecting assets with stable cash flow, the interim report stated.

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