(Yicai) Aug. 18 -- Insurance funds have continued to increase their stock allocation in the second quarter of the year, according to the latest official data.

Insurance funds’ stock allocation in the second quarter surged 8.9 percent from the first quarter and nearly 48 percent from a year earlier, much higher than the 17 percent increase in their total allocated fund balance in the period, the National Financial Regulatory Administration said on Aug. 15.

In the first quarter, insurance funds invested CNY2.82 trillion (USD392.6 billion) in stocks, up 16 percent from the fourth quarter of last year, according to data previously released by the NFRA.

As of June 30, the insurance industry had assets of CNY39.2 trillion (USD5.46 trillion), an increase of 9.2 percent from a year earlier, the NFRA data also showed. The proportion of stocks to insurance funds’ total asset allocation rose to 8.5 percent from 6.7 percent in the period.

The proportion of shares to the total allocation of insurance funds mainly increased for two reasons, industry insiders believe. The first is that in a low interest rate environment, insurance companies are investing in listed firms that pay high dividends to offset the pressure on their net investment yield caused by declining bond yields.

The second reason is that regulators have encouraged more long-term insurance funds to enter the stock market. In April, the NFRA raised the stock allocation ceiling by 5 percentage points to allow insurance funds to invest 10 percent to 50 percent of their total assets in the stock market, depending on their solvency ratio.

In the first half of the year, insurance companies’ premium income rose 5.1 percent to CNY3.7 trillion (USD515.2 billion) from the same period last year, according to the NFRA. This was mainly thanks to the faster growth in life insurance premiums, which increased to 5.4 percent in the first six months from 3.3 percent in the first five months.

The rise in life insurance premiums has benefited, to some extent, from sustained customer demand for insurance savings due to declining bank deposit rates, industry analysts believe. Moreover, the anticipation for an interest rate cut at the end of August has further highlighted this demand.

Industry insiders told Yicai that the life insurance sector will enter a product transition period at the end of this month, with premiums likely growing as customers rush to buy products that are expected to be discontinued.

However, as this would be the third consecutive year with interest rate cuts, demand has already been largely released, so the impact of this product transition will not be as big as in the past two years, the insiders noted.

Editor: Futura Costaglione