The "hidden cards" of the trillion-yuan insurance private equity are exposed, and Honghu Fund Phase I made a profit of 14%

As one of the state-owned large insurance institutions with the most distinctive characteristics in equity investment, NCI's investment trends are quite noteworthy.

On the evening of August 29, NCI officially disclosed its semi-annual report, and its "aggressive" investment style and impressive performance in the first half of the year greatly boosted investor sentiment.

At this time, looking back at NCI's increase in 2025, the 35.59% increase corresponds well with the net profit growth in the first half of the year (see chart below).

At the same time, with the release of NCI's semi-annual report, the latest investment details of the billion-level insurance private equity fund Honghu, jointly established by NCI and China Life, were also "disclosed" in detail.

As a super giant with a planned investment scale exceeding 100 billion, Honghu is among the top five large private equity institutions in the country, and the good returns already earned are expected to encourage the insurance industry to continuously enter the A-share market through long-term stock investment pilot mechanisms.

The stock market operation details of insurance giants are worth a look.

Earned 14.8 billion in the first half of the year

As is well known, NCI's investment business has a very long history among mainland insurance companies, and its performance elasticity has always been very sufficient.

As a listed insurance company with a "fierce" stock price increase this year, NCI's interim performance report is particularly noteworthy, and its investment performance has become a "barometer" for the entire life insurance industry.

The semi-annual report shows: NCI achieved operating income of 70.041 billion yuan in the first half of the year, a year-on-year increase of 25.99%; the net profit attributable to the parent company was 14.799 billion yuan, a year-on-year increase of 33.53%.

In addition, NCI achieved original insurance premium income of 121.262 billion yuan in the first half of the year, a year-on-year increase of 22.7%; the first-year premium income for long-term insurance was 39.622 billion yuan, a year-on-year increase of 113.1%; renewal premium income was 78.831 billion yuan, a year-on-year increase of 1.5%.

This drove NCI's embedded value to reach 279.394 billion yuan, an increase of 8.1% compared to the end of the previous year (as of June 30, 2025).

Annualized investment return rate of 6.3%

In addition, NCI's investment strategy and portfolio adjustments often serve as a "barometer" for insurance capital investments, used by outsiders to observe the dynamics of insurance capital allocation to equity assets.

NCI disclosed: As of June 30, 2025, the company's investment scale was 17.1 trillion yuan, of which direct stock investments exceeded 199.2 billion yuan, and entrusted fund investments were 120.2 billion yuan, totaling nearly 320 billion yuan.

At the same time, NCI's annualized total investment return rate in the first half of this year was 5.9%, and the annualized comprehensive investment return rate in the first half was 6.3%, showing significant improvement compared to previous years.

The latter is obviously related to NCI having a large amount of life insurance business, with stable funding sources and longer durations. It is more inclined to long-term allocation of major asset classes to obtain long-term growth dividends

Partly Attributed to Increasing Holdings in High-Dividend Assets

An annualized comprehensive investment return rate of 6.3% is evidently very good, especially against the backdrop of current five-year fixed deposit interest rates falling below 2%.

NCI disclosed in its semi-annual report: the company actively responds to the call for insurance funds to enter the market, and based on its previous stake in multiple high-quality listed companies, continues to actively increase its allocation of high-quality underlying assets that can withstand the challenges of low interest rates.

In terms of specific allocation strategies: the company focuses on a prudent investment strategy and tactical asset allocation, always using long-duration, stable cash flow fixed-income assets as the ballast to solidify the foundation of asset-liability matching, and improves long-term investment returns through scientific allocation of equity assets in the primary and secondary markets.

Among them, the semi-annual report contains a very key investment information: "As of June 30, 2025, the company's high-dividend OCI equity instrument investments increased from CNY 30.64 billion at the beginning of the year to CNY 37.466 billion, an increase of CNY 6.826 billion."

According to industry insiders, the so-called high-dividend OCI equity instrument investments refer to the allocation of insurance funds in the capital market to stocks or equity assets that have stable cash dividend capabilities, and are accounted for as "Other Comprehensive Income (OCI)" investment positions according to accounting standards.

Typically, high-dividend OCI assets have become a favored allocation direction for insurance funds.

Honghu Phase I Has Already Realized Floating Profit of CNY 5.7 Billion

In addition to the OCI account, NCI also has a hidden stock investment account, and this portion of assets is only partially settled in the semi-annual report.

This is the share of the Honghu Zhiyuan Fund, which NCI co-invested in with China Life. According to relevant information, the full name of the "Honghu Zhiyuan" fund is Honghu Zhiyuan (Shanghai) Private Investment Fund Co., Ltd., commonly referred to as Honghu Phase I, with a registered capital of CNY 50 billion, and the two insurance funds each contributed 50%, totaling CNY 25 billion.

The latest semi-annual report from NCI shows (see the image below) that as of June 30 this year, the net assets of the Honghu Zhiyuan Fund have reached CNY 55.684 billion, and total assets have reached CNY 57.112 billion.

This roughly indicates that the Honghu Phase I fund currently has a realized asset appreciation (meeting relevant accounting standards) of at least CNY 5.684 billion, with profits exceeding 11%.

However, this is not all. According to the equity structure and corporate governance of Honghu Phase I, it is highly likely that NCI uses a similar equity method to consolidate this institution.

This likely means that a considerable portion of unrealized asset appreciation remains on the books, and the actual profit situation of Honghu No. 1 is even higher

Borrowing Money to Invest? Focused on Dividend Income?

Additionally, according to the semi-annual report disclosed by NCI, Honghu Phase I currently has certain liabilities. As of June 30, the financing scale is approximately over 1.3 billion yuan, which is likely generated from the company's liquidity management.

Historically, Honghu has long held shares in Yili Industrial Group, Shaanxi Coal and Chemical Industry, and China Telecom, with the latest market capitalization of these three companies exceeding 12 billion yuan.

Among them, the long-held shares in Yili Industrial Group are expected to bring nearly 200 million yuan in dividends to Honghu Phase I. China Telecom is expected to contribute over 200 million yuan in dividends (assuming no change in equity holdings and full participation in both dividend distributions). Shaanxi Coal is expected to yield about 150 million yuan in dividends.

The total dividends from the three companies could accumulate to nearly 550 million yuan, resulting in an approximate dividend yield of 4.5% for Honghu.

Target Scale Exceeds 100 Billion Yuan

According to the announcement, after the establishment of Honghu Phase I, China Life and NCI did not inject capital but instead initiated multiple products such as Honghu Phase II and Phase III, planning to raise over 100 billion yuan.

This semi-annual report reveals that on April 29, 2025, the board of directors of NCI approved the company's investment to subscribe for shares in Honghu Zhiyuan Phase II, initiated by Guofeng Xinghua. Honghu Zhiyuan Phase II implements a long-term investment philosophy, aiming to achieve stable dividend income through low-frequency trading and long-term holding. The company will account for Honghu Zhiyuan Phase II as a joint venture using the equity method. As of June 30, 2025, the company has invested 10 billion yuan to subscribe for shares in Honghu Zhiyuan Phase II.

On May 22 and July 4, 2025, NCI signed contracts to invest 10 billion yuan and 11.25 billion yuan respectively to subscribe for shares in the Guofeng Xinghua Honghu Zhiyuan Phase II and Phase III No. 1 private securities investment fund initiated by Guofeng Xinghua (Beijing) Private Fund Management Co., Ltd. As of June 30, 2025, the Phase II fund is currently being allocated, while the Phase III fund is in preparation.

According to the previously signed plan and the investment appreciation from this round of Honghu Phase I, the fund assets of Honghu are estimated to have "reserved" over 100 billion yuan.

Such investment expectations will undoubtedly significantly encourage other insurance funds to accelerate their investments in the future.

This giant will undoubtedly occupy more influence in the domestic market in the future.

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