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Essential IR Insights Newsletter - February 2023

Ping An to boost long-term investments to combat lower returns

Ping An Insurance (Group) Co. of China Ltd. plans to boost long-term investments to hedge against lower global financial asset returns in the next five to 10 years, a senior executive said.

The insurer plans to increase investment in long-duration fixed-income assets and the real estate sector, Timothy Chan, chief investment officer at Ping An, said during an investment presentation in Shenzhen on Oct. 12.

Chan pointed to unfavorable factors such as disappearing economic benefits from demographic changes as the global population ages and global inflation trending up. Further, the extension of stricter regulations around the world to nonfinancial sectors such as technology "will restrain companies' investments and thus their earnings," he said.

Ping An has been looking to extend its asset duration by actively purchasing long-duration assets and seeking tax exemptions. Its bond investments averaged 14.75 years between 2013 and 2017, Chan said. Further, Ping An said its asset-liability mismatch has been cut by two years over the past five years.

The Chinese insurer also plans to boost its real estate investments; it intends for them to make up about 10% of its total investments. As of June 30, real estate accounted for just 1.8% of Ping An's 2.58 trillion yuan in investment assets.

Chan noted that Ping An forecasts high investment returns between 7% and 15% in segments such as retirement homes, industrial parks, long-term rental apartments and property along China's high-speed railways. He said Ping An will not invest into residential buildings, which has been the target of speculation in recent years, sending prices soaring.

Investing into real estate assets can provide stable cash yield to net investment income, and help hedge against long-term inflation, the chief investment officer said.

Meanwhile, Ping An will maintain its focus on select equities with high dividend payments. In the first half, Ping An received about 6 billion yuan in dividends from its stock holdings, including HSBC Holdings PLC, Industrial & Commercial Bank of China Ltd. and Country Garden Holdings Co. Ltd., making up around 10% of its first-half net investment income of 58.4 billion yuan.

As of Oct. 11, US$1 was equivalent to 6.89 Chinese yuan.