“Investor Network” Cui Yuechen

Recently, Pearl River Life attracted market attention because it did not redeem the relevant capital supplement bonds issued in 2019.

Normally, insurance companies will choose to redeem capital supplement bonds that are about to expire. There are two reasons: First, if an enterprise does not redeem, it will have an impact on its credit; second, most companies that chose not to redeem in previous years had poor business performance, low risk ratings, and weakened solvency.

Does Pearl River Life's failure to redeem the capital supplement bonds issued in 2019 indicate that it is facing operating pressure or insufficient solvency?

Also worth noting is the close ties between Pearl River Life Insurance and the Hopsang Zhu Family. According to the enterprise investigation, the largest shareholder of Pearl River Life Insurance is Guangdong Pearl River Investment Holding Group (hereinafter referred to as “Pearl River Investment”). Through equity penetration, it was discovered that Zhu Weihang indirectly holds 40.45% of Pearl River Life Insurance's shares through Pearl River Investment and Guangdong Han Construction Investment Co., Ltd., and is the actual controller of the company. The company's other major shareholders, and the actual controllers behind them are all members of the Zhu family.

In other words, the Zhu family achieved their layout in the financial sector through Pearl River Life Insurance.

However, since last year, the real estate industry has begun a downward cycle. With the thunderstorm of leading real estate companies, the industry ushered in a cold winter, and the Zhu family, whose main business is real estate, was also affected.

In March of this year, Hesheng Creative Development Group (00754.HK), a subsidiary of the Zhu family, merged with Pearl River Investment, and the internal business and organizational structure were adjusted.

Will this business restructuring have an impact on Pearl River Life's business? Now, is the difficult situation facing Pearl River Life related to the difficulties faced by the Zhu family's real estate business?

Self-management difficulties

Problems with Pearl River Life's operations may have long been apparent.

First, Pearl River Life's solvency report was only updated to the fourth quarter of 2021.

According to the solvency report, as of the end of the fourth quarter of 2021, Pearl River Life's core and comprehensive solvency ratios were 52.02% and 104.04% respectively, and the comprehensive risk rating was Class C.

However, according to the Banking Insurance Regulatory Commission's regulations on the solvency of insurance companies, the core solvency adequacy ratio must not be less than 50%, the comprehensive solvency adequacy ratio must not be less than 100%, and the comprehensive risk rating is Class B and above.

It can be seen from this that the solvency recently disclosed by Pearl River Life Insurance is close to the regulatory red line, and the risk rating is not up to standard.

Moreover, the company has failed to disclose solvency reports on time for two consecutive years, which does not comply with the requirement that “unlisted insurance companies shall disclose a summary of solvency reports within 30 days after the end of each quarter” in the insurance companies' solvency supervision rules.

At the same time, Pearl River Life's annual report was only updated to 2021, and no detailed financial data was disclosed in the annual report.

Regarding its 2021 performance, the follow-up rating report issued by Joint Credit shows that in 2021, Pearl River Life Insurance business revenue increased, net profit changed from profit to loss, and the decline in capital adequacy ratio was quite obvious. The main reason is that real estate investment is relatively large, and investment continues to lose money.

As of the end of 2021, Pearl River Life's total investment assets were 85.155 billion yuan, of which real estate investments, liquid assets, trust plans, equity assets and fixed income assets accounted for 26%, 20.07%, 19.8%, 18.94%, and 15.2%, respectively; the amount of overdue investment assets was 3,094 billion yuan, mainly involving the real estate industry.

Therefore, as early as 2021, Pearl River Life had problems such as insufficient capital and poor solvency. Its financial data and solvency for two consecutive years in 2022 and 2023 are also unknown.

Therefore, it doesn't seem that surprising that Pearl River Life does not exercise the right to redeem capital supplement bonds.

The Zhu family resurfaces

Through enterprise investigation and equity penetration, it was discovered that the actual controller of Pearl River Life Insurance is Zhu Weihang, and the other major shareholders are all members of the Zhu family.

According to information, the Zhu family belongs to the same Chaoshan family as Li Ka-shing, but they are very mysterious and low-key.

In the early years, the three Zhu brothers, Zhu Rai, Zhu Mengyi, and Zhu Qingyi, started with real estate. After 20 years of development, they have now gradually formed a huge commercial empire. The industry covers various fields such as real estate, infrastructure, medicine, energy, finance, and investment, with total assets exceeding 400 billion yuan.

Boss Zhu Rai is in charge of Guangdong Xinnanfang Group Co., Ltd., which mainly focuses on the pharmaceutical industry, and also involves the fields of energy and infrastructure. It is worth mentioning that New Southern Group holds 10.2985% of Pearl River Life Insurance's shares and is the fifth largest shareholder of Pearl River Life Insurance.

Mr. Zhu Mengyi's subsidiary mainly includes Hesheng Creative Development and Pearl River Investment. The former is engaged in real estate development business, while the latter is a diversified investment enterprise. Meanwhile, Zhu Weihang, the actual controller of Pearl River Life Insurance, is Zhu Mengyi's second son and is mainly in charge of Pearl River Investment.

Mr. Zhu Qingyi is in charge of Zhuguang Group and Zhuguang Holdings, whose main business is real estate. At the same time, Zhuguang Group is also the second-largest shareholder of Pearl River Life Insurance, holding 20% of the shares.

The three brothers have overlapping businesses and cross-shareholding, and are closely linked.

In recent years, with the rapid decline in the size of the real estate market, Zhu Mengyi's Hesheng Creative Development business has also been affected.

On the increasingly tough real estate circuit, Zhu Mengyi chose to redistribute and adjust the family business. Last year, news broke of a merger between Hop Sang Chuangzhan and Pearl River Investment.

Structural adjustment of the Hopsang Pearl River System

After a year of preparation, in March of this year, Hopson Innovation Exhibition and Pearl River Investment finally ushered in a merger.

After the merger, the business scope of the new company will cover residential development, commercial operations, real estate, and the old renovation sector. The region covers the five cities of Guangzhou, Dongguan, Jiangmen, Zhongshan and Foshan.

At the same time, there was a wave of major internal personnel changes. The new chairman and general manager of the integrated company were appointed by the management of the former H&P department. The former chairman and general manager of Pearl River Investment Guangzhou served as co-general manager and deputy general manager respectively.

Prior to the merger, Hop Sang Chuangzhan and Pearl River Investment had always had cross-business operations, and both competed and cooperated with each other within the same region. After the merger, the core management team was mainly based on Hesheng Creative Development, supplemented by Pearl River Investment.

Whether this business restructuring will have an impact on Pearl River Life's operations remains to be seen. The Investor Network will continue to pay attention to the subsequent development of the Hop Sang Pearl River System. (Produced by Thinking Finance) ■