Insurance asset management companies that have been approved for asset securitization (ABS) business on the exchange have made frequent moves recently. Among them, China Life Asset Management has two ABS orders that have been approved, and has participated in the design of product solutions and invested in the ABS project of holding real estate, which has accelerated the ABS business.
What are the considerations for applying for the first batch of ABS products and participating in the innovative ABS business? What are the plans for the asset securitization business in the era of stock assets? Zhao Hui, vice president of China Life Asset Management, was recently interviewed by a reporter from Securities Times and Brokerage China, responding to relevant questions.
Triple consideration of the first two ABS declarations
On October 13, 2023, five insurance asset management companies, including China Life Asset Management, Taikang Asset Management, CPIC Asset Management, PICC Asset Management and Ping An Asset Management, were the first to receive no-objection letters issued by the Shanghai and Shenzhen Stock Exchanges, and were approved to carry out asset securitization (ABS) and real estate investment trusts (REITs) business on a pilot basis. Insurance asset management companies attach great importance to this type of business and rapidly promote the implementation of projects.
"The company carefully selected the first phase of the application project by considering various factors such as policy orientation, steady investment, and allocation demand. Zhao Hui said when talking about the first batch of ABS declarations of China Life Assets.
According to China Life Asset Information, the first two ABS products declared and approved by the Shanghai and Shenzhen Stock Exchanges are the "Chinese Life-Innovation and Technology Financial Leasing Asset-Backed Special Plan" (hereinafter referred to as China Life Innovation and Technology Financial Leasing) and the "Chinese Life-Innovation and Technology Supply Chain Asset-Backed Special Plan" (hereinafter referred to as China Life Innovation and Technology Supply Chain).
According to Zhao Hui, the first batch of ABS declarations has three considerations.
First of all, after obtaining the first batch of business qualifications, China Life Asset Management hopes to actively use the ABS product of the exchange as an important financial tool to "put pen to paper" to do a good job in technology finance and inclusive finance.
For example, in the above two ABS products, the China Life Chuanggong financial leasing project takes XCMG Group as the core enterprise, which can effectively revitalize the stock assets and serve the high-quality development of the mainland's high-end equipment manufacturing industry.
China Life's innovation and technology supply chain project has Vanke Group as the core enterprise. The issuance and establishment of the product can meet Vanke's needs for rational planning of financial structure through supply chain products, and can also effectively help suppliers shorten the account period, improve the efficiency of capital turnover, and solve problems for small and medium-sized enterprises in the upstream of real estate.
Secondly, in terms of underlying assets, financial leasing claims and supply chain are relatively mature underlying assets in the market. "We started with our preferred counterparties and familiar underlying assets as the first batch of project declarations, reflecting a steady style. Zhao Hui said.
Thirdly, from the perspective of term, the term of China Life Innovation and Technology Financial Leasing and China Life Innovation and Technology Supply Chain Project is medium-term and short-term respectively, which meets the multi-term allocation needs of insurance funds.
Participated in the ABS project of holding real estate
In addition to the above two ABS projects, China Life Asset Management participated in the design and invested 1.42 billion yuan in the holding real estate ABS project "Huatai-Zhongjiao Road Jianqing West Bridge Holding Real Estate Asset-Backed Special Plan", which has also been implemented recently.
Zhao Hui said that the special plan for holding real estate is an innovative ABS product, and the target project is the Qingxi Bridge project of China Communications Construction Co., Ltd. The underlying cash flow of the product comes from the operating income of the Qingxi Bridge and wiring engineering project, which has been truly sold, and the asset can help the enterprise improve operational efficiency and optimize the asset-liability structure after asset revitalization. At the same time, the term of the product matches the operating life of the underlying assets, up to 21 years, and the long-term ABS products are highly consistent with the characteristics of large scale and long term of insurance funds.
"Considering the differences between such underlying assets and the previous ABS underlying assets, combined with the investment experience of this product, the company is currently carefully evaluating the relevant investment management process and making corresponding preparations for subsequent investment. Zhao Hui said.
According to Zhao Hui, China Life Asset's alternative investment is deeply involved in infrastructure fields such as transportation, municipal, and new energy, and its assets are in line with the characteristics of the exchange's ABS products. In the future, we will actively study the ABS project of participating in the holding real estate, give full play to the long-term characteristics of insurance funds, and develop ABS products that meet the needs of both partners and insurance funds.
Further explore the path of revitalizing existing assets
"In the past few decades, the mainland has formed more than 100 billion yuan of stock assets in the field of infrastructure, and these enterprises that undertake construction work have gradually formed the characteristics of heavy assets, high leverage and low turnover. ABS and REITs are very important and effective tools to revitalize existing assets, and they are also a powerful starting point for finance to improve the quality of services for the real economy. Zhao Hui said that it is of great significance for the regulatory authorities to approve five insurance asset management institutions to carry out ABS business.
He introduced that for enterprises, the securitization of a large amount of stock assets can bring cash assets to enterprises, provide new financing channels, help enterprises recover cash flow in advance, improve capital turnover, and reduce their own leverage ratio. At the same time, enterprises can use the revitalized funds to carry out new effective investment, transformation and upgrading to form new productive forces.
Zhao Hui said that China Life Asset Management adheres to the fundamental purpose of providing financial services to the real economy, and has accumulated certain experience in the field of stock asset revitalization. In terms of assets, it mainly focuses on revitalizing the assets of infrastructure projects with large stock scale, good returns or high growth potential. In terms of regions, it mainly focuses on the Beijing-Tianjin-Hebei region, the Yangtze River Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta, the Yellow River Basin and other regions, as well as regions with strong investment demand and large stock scale.
According to reports, China Life Asset Management has started investing in asset securitization products since 2013, and currently invests in a variety of asset types, including lease claims, accounts receivable, PPP-ABS, CMBS (commercial real estate mortgage-backed securities), quasi-REITs, etc. The company obtained the insurance asset-backed scheme business license in 2021 and has issued a number of products.
"In the next step, China Life Asset Management will further explore an effective path to revitalize existing assets. Zhao Hui introduced that the first is to actively participate in the investment in affordable housing, urban villages, old city transformation, historical and cultural block transformation, urban renewal and other projects, and promote the organic combination of revitalization of stock and reconstruction and expansion. The second is to participate in the market-oriented debt-to-equity swap business by initiating the establishment of equity investment plans, debt-to-equity swap investment plans, debt-for-equity swap investment funds, etc., so as to prevent debt risks, optimize the asset structure, and revitalize idle and inefficient assets. The third is to actively carry out asset securitization investment, select basic assets such as REITs, CMBS, and consumer finance as the key directions, and further increase ABS investment, make good use of the exchange's ABS license, actively carry out customized investment, seize the first-mover advantage of holding ABS, and increase promotion and replication.
Editor-in-charge: Gui Yanmin
Proofreading: Wang Wei