My Age of Investment

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"Negotiations with heavyweight potential buyers broke down, AIA's future fell into fog, and parent company AIG's debt repayment plan aborted\

,""Vision Capital Wants to Give Up Acquisition of AIA?" Spokesperson Mr. Abel declined to comment."

"AIG's new CEO Mr. Li Di: AIG is promoting its debt reduction plan in an orderly manner, but will never sell any of the company's assets at a low price\

,"…

News about the sale of AIA has been reported by major media outlets for half a month.

The plot is complicated and confusing, with twists and turns happening every three days, which makes the outside audience almost numb.

Just when everyone was almost no longer interested in this matter, the official announcement finally came.

Envision Capital and AIG Group also announced that Envision Financial Holdings Group, a subsidiary of Envision Capital, has acquired 100% of the shares of AIA Group for a transaction consideration of US$30 billion.

The outside world did not express any objection to this transaction price. Although it is not high, it cannot be said to be selling assets at a low price.

CFIUS, the Committee on Foreign Investment in the United States, rarely came out to create difficulties. Instead, it gave the green light and cleared the entire transaction.

This is because the federal government is now the largest shareholder of AIG Group, holding 79.9% of the company's shares, and also holds a large amount of debt.

Now the government is eager to get rid of the hot potato as soon as possible.

Everyone is happy to see AIG pay off its debts and resume normal operations as soon as possible. .

…………

…………

Inside 40 Wall Street.

Chen Hong, who had just arrived from Hong Kong urgently today, looked at Xia Jingxing in disbelief, "Have you settled the AIA so quickly?"

"Is it fast? I think it's a bit slow." Xia Jingxing shook his head and laughed.

"I thought it would take several months or even a year to negotiate such a large deal, but I didn't expect you to get it done in half a month."

Chen Hong spread his hands towards Xia Jingxing, who was sitting across from him. He now felt that he was getting further and further away from Xia Jingxing. The other party had spent 30 billion US dollars quietly. This incident had caused a great sensation in the country!

Envision Capital has done what ICBC and China Life failed to do or dare not do.

Coupled with the previous short selling of the Li Huangtai family and the short selling of the public, there is no doubt that Vision Capital has grown into a world-class financial giant that countless financial practitioners look up to!

Xia Jingxing smiled and didn't explain much.

In this acquisition, Blankfein and Goldman Sachs made great efforts.

Therefore, Vision Capital paid the other party an acquisition advisory fee of up to US$300 million.

And that’s not all the reward!

Vision Capital also promised some future benefits, which will be cashed to Goldman Sachs one by one in the future.

Why not pay Goldman Sachs all in one lump sum?

The main reason is that it is a bit unreasonable and can easily appear fishy.

For example, in a US$30 billion acquisition case, Goldman Sachs was paid a remuneration of US$1 billion or US$2 billion. Even a fool can see that there is a PY transaction.

Chen Hong suddenly asked: "Isn't it inappropriate for you to spend US$30 billion to buy an insurance company with a somewhat traditional business?"

Xia Jingxing did not hide anything and said what Blankfein once said: "The meaning of an insurance company in the hands of Buffett and me is different from that in the hands of ordinary people."

Chen Hong suddenly realized: "Are you eyeing the insurance company's float?"

Xia Jingxing smiled. As we all know, when policyholders purchase insurance, they pay the premium in advance, and only start receiving insurance benefits after the insurance is out of danger or the insurance expires.

So for insurance companies, which can collect such a large sum of money every year, every quarter, or even every month, it is naturally impossible for them to leave it idle. Except for a certain proportion of recent claims or payments, the rest of the funds are It can be used freely, and this part of the fund is called insurance float.

Domestic investment restrictions on insurance float are quite strict.

For example, Boss Yao raised his banner to Vanke, using its insurance capital.

It will be around 2020 when the country takes a big step to liberalize insurance capital restrictions and allow a high proportion of insurance capital to be allocated to high-risk assets such as VC and PE.

Prior to this, domestic insurance laws had great restrictions on the investment use of float. For example, it clearly stipulated that the upper limit for insurance companies to invest in stocks and stock funds was 10% of the total assets at the end of the previous year.

This 10% is still a restriction relaxed by the China Insurance Regulatory Commission in 2008 in response to the call of the industry.

Earlier, the capital limit for insurance capital entering the market was 5%, and it was also restricted from investing in stocks that increased by more than 100% in the past 12 months...

In other words, you cannot buy stocks that are too volatile.

Moreover, there is an upper limit on the proportion of insurance capital holding a single stock, and full positions are not allowed.

This is because the regulatory agencies have considered that if there are no restrictions, insurance companies will have all kinds of shady operations. If they lose all their float, they will have to close down, which will easily lead to social conflicts.

Generally speaking, at this time, more domestic insurance funds are choosing to allocate low-risk fixed-income products, such as bonds, certificates of deposit, etc.

In foreign countries, the financial industry is relatively developed and there are not so many restrictions on insurance funds.

Buffett's secret to getting rich is insurance float. Berkshire Hathaway can sell insurance to obtain funds with zero or even negative interest rates from policyholders, and then use these low-cost funds to invest in the stock market.

Charlie Munger once summarized Berkshire's business model this way: We are like hedgehogs, we only know one trick, which is to find float that costs less than 3%, and then invest it in companies that can generate a 13% return.

In fact, after decades of operations, Berkshire Hathaway's cost of absorbing funds has remained below -2% for a long time.

This means that all customers will hand over their funds to Buffett for free use and pay him a custody fee of more than 2%.

Low-cost unlimited financing with one hand and value investment with the other hand, this is the true face of Buffett's investment empire.

Those who use online loans to speculate in stocks are inherently at a disadvantage at the starting line.

Insurance companies have two major profit models, one is underwriting profits, and the other is investment income.

Moreover, for general non-financial insurance, the investment income does not need to be distributed to LPs like private equity funds. All investment income belongs to all shareholders of the insurance company.

Chen Hong said with emotion: "You have made a good move. AIA's main premium income comes from Asian markets other than the mainland.

I have seen relevant data. Last year, AIA’s mainland premium income was less than 8 billion yuan, which is far from being comparable to China Life, which has a premium income of nearly 300 billion yuan, and Ping An, which has a premium income of 130 billion yuan.

But when the entire Asian market is taken together, AIA’s annual premium income is nearly US$5 billion.

With such a large sum of money in your hands, I believe that within a few years, you can earn back the US$30 billion you spent to buy the company. "

Xia Jingxing said with a smile: "It's not that easy. What I mainly value is that insurance companies are stable assets that don't fluctuate that much and are suitable for long-term holdings."

Chen Hong didn't believe Xia Jingxing's words. He felt that he was eyeing the low-cost financing channels of insurance companies and wanted to be the next Xia Feite.

"I heard that Berkshire Hathaway has as much as sixty to seventy billion dollars of float on its books?"

"right!"

Xia Jingxing nodded lightly. In another ten years, this number will double again.

With more than 100 billion US dollars in hand, even if Buffett does nothing every year, the underwriting profit alone will be 10 to 2 billion US dollars.

In fact, Berkshire's main profits come from investment income.

Without Buffett, Berkshire would be just an ordinary insurance company.

But in the hands of Buffett, it is a real money printing machine.

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