The starting bid halved yet still no interest, Xinhua Lian Holdings "sells off" its stake in Three Gorges Life Insurance

Why do insurance equity auctions repeatedly fail to attract buyers?

Our reporter (chinatimes.net.cn), Wu Min, Beijing report

XinHuaLian Holdings’ 200 million shares of Three Gorges Life Insurance are being put back on the “shelf” for the fourth time.

According to Jingdong auction platform, the 6.59% stake held by XinHuaLian Holdings, the fifth-largest shareholder of Three Gorges Life Insurance, will go up for auction on April 2.

This is the fourth attempt by XinHuaLian Holdings to dispose of this asset. In previous three auctions, starting prices were gradually lowered from 202 million yuan to 161.6 million yuan and then to 129.28 million yuan, all failing to attract bidders. The current starting price is set at 103.424 million yuan, equivalent to only 0.517 yuan per share, halving from the initial 202 million yuan. As of March 19, no bids have been received.

If XinHuaLian Holdings’ stake remains unsold for a long time, it could impact corporate governance and future financing, and whether the company has contingency plans. Our reporter contacted relevant officials at Three Gorges Life Insurance for an interview, but as of press time, no response has been received.

Senior researcher Jiang Han from Pangu Think Tank believes that the repeated failed auctions and halving of value reflect a weakening of the “scarcity premium” for insurance equity. In the past, insurance licenses commanded high market premiums due to their scarcity, but under strict regulation, increased industry competition, and slowing economic growth, investor enthusiasm for insurance equity has cooled. Relying solely on licenses no longer supports high valuations.

Valuation Logic of Insurance Equity Is Changing

Since 2020, XinHuaLian Holdings has been facing liquidity issues, entering substantive merger and reorganization procedures in 2023, with the reorganization plan completed by June 2025. Disposing of its financial holdings is a key step in debt repayment and asset revitalization.

The 200 million shares in this auction represent 6.59% of Three Gorges Life Insurance, all of XinHuaLian Holdings’ unpledged shares. If sold successfully, XinHuaLian will fully exit the shareholder list of Three Gorges Life.

Nearly a year has passed since the first auction. The starting price has dropped from 202 million yuan to 103 million yuan, reflecting both XinHuaLian’s urgent need for liquidity and the current market temperature for insurance equity.

A senior industry insider pointed out that in the past, insurance licenses were scarce, and equity could fetch high premiums. Now, the capital market’s valuation standards have shifted from “license-driven” to “profit-driven.” Investors are more concerned with a company’s sustainable profitability, capital consumption, and strategic synergy.

“Regarding this stake, XinHuaLian’s 6.59% is a financial Tier II shareholder, without operational control. Since Three Gorges Life has not yet turned a profit, short-term return expectations are unclear. These factors, combined with the industry’s return to rational valuation, make potential investors more cautious,” said the insider.

Wang Guojun, professor at the Insurance School of University of International Business and Economics, told Huaxia Times that the “scarcity premium” for insurance equity has significantly shrunk, and the market has returned to rationality, with license value returning to normal or even low levels. The valuation logic has shifted from “license speculation” to “profitability.” Previously, having a license meant high value; now, only insurers that are profitable and can pay dividends are recognized.

Regarding the difficulty in transferring equity of small and medium insurers, Wang Guojun told us: “During economic downturns, many industries face similar difficulties. Insurance companies have long profit cycles, and investors cannot see clear profit turning points. Additionally, fierce industry competition and lack of differentiation for small and medium insurers lead to less attractive valuations during transfers.”

“Under the trend of shifting from license premiums to profitability in insurance equity valuation, small and medium insurers face many challenges in attracting strategic investors, including demonstrating sustainable profitability, improving shareholder return expectations, and meeting high governance standards,” Jiang Han pointed out. To adapt, small and medium insurers should adjust strategies, focus on core businesses, optimize structures, and improve profitability. They should also strengthen corporate governance, increase transparency, and clarify dividend policies to attract investors and win strategic partners in a competitive market.

It is worth noting that the starting price of the fourth auction of Three Gorges Life is close to the original capital contribution. Whether this price can attract buyers and break the deadlock remains to be seen.

Never Profited Since Inception

Since its establishment, Three Gorges Life has never escaped losses. Reviewing its annual financial reports: in 2017, the year of its founding, it lost 84 million yuan; subsequent years saw fluctuations but no profits. Losses were 58 million yuan in 2018, 119 million in 2019, 105 million in 2020, 65 million in 2021, 110 million in 2022, 197 million in 2023, 252 million in 2024, and although losses decreased to 197 million in 2025, total accumulated losses amount to nearly 1.2 billion yuan.

For a company whose registered capital has just been increased to 3.033 billion yuan, this means over one-third of its capital has been consumed in operations.

The insurance industry is known for the saying “seven flat, eight profit,” indicating that as a long-term investment industry, a newly established insurance company typically experiences a long loss period, reaching break-even around the seventh year and profitability by the eighth. Yet, Three Gorges Life, now in its ninth year, still shows no signs of profit.

Alongside the accumulated losses, the company’s main business scale has been shrinking. Initially, with the vigor of a new company and resources from early shareholders, premium income peaked at 1.1 billion yuan in 2020. It was 110 million yuan in 2018, surged to 917 million in 2019, and reached a peak of 1.102 billion in 2020.

However, from 2021 onward, the premium scale began to decline for four consecutive years: down to 624 million in 2021, 559 million in 2022, 406 million in 2023, and further to 333 million in 2024. In 2025, it rebounded to 633 million yuan, a 90% increase year-on-year, but still far below the 2020 high.

In 2025, the company’s shareholding structure changed significantly. In November, Chongqing Yufu Capital Operation Group transferred 562 million shares (18.54% of total shares) free of charge to Chongqing Development Investment Co., Ltd. After the transfer, Chongqing Development’s stake rose to 33%, becoming the largest shareholder, while Yufu Capital’s share dropped to 13.35%.

Additionally, in March 2025, two state-owned capital shareholders—Chongqing Development and Chongqing Three Gorges State-owned Capital Operation Group—were introduced through capital increases. The top four shareholders are now all Chongqing state-owned enterprises, holding a combined 81.88%. The governance structure led by state capital is basically formed.

The current competitive landscape in the insurance market is not friendly to regional small and medium insurers like Three Gorges Life. Leading insurers leverage brand, channels, and cost advantages to build formidable barriers in traditional life insurance.

The deep involvement of state capital not only provides substantial capital but also offers credit backing, resource synergy, and strategic resilience.

Jiang Han told Huaxia Times that the core advantage of Three Gorges Life lies in Chongqing state-owned backing and regional resources. It should prioritize deepening its presence in the Chengdu-Chongqing twin-city economic circle, focusing on local pension and inclusive insurance policies. Regional focus can reduce customer acquisition and operational costs, and collaborating with local governments to develop customized products can create differentiation. For nationwide expansion, profitability and capital strength are prerequisites. Currently, a better approach is “deepening in regions + expanding online,” using digital channels to reach neighboring provinces, rather than heavy asset investment in branch networks, to avoid the pitfalls of “big but not strong.”

Since inception, never profitable

Three Gorges Life has been unprofitable since its founding. Looking at its financial reports: in 2017, it lost 84 million yuan; in 2018, 58 million; 2019, 119 million; 2020, 105 million; 2021, 65 million; 2022, 110 million; 2023, 197 million; 2024, 252 million; and in 2025, losses narrowed to 197 million, but total accumulated losses are nearly 1.2 billion yuan.

For a company with a recently increased registered capital of 3.033 billion yuan, this indicates that over one-third of its capital has been consumed in operations.

The saying “seven flat, eight profit” reflects the typical long loss cycle of new insurance companies, which usually reach break-even around year 7 and profit in year 8. Yet, Three Gorges Life, now in its ninth year, still shows no profit signs.

Its main business scale has also been shrinking. Initially, with the vigor of a new company and early shareholder resources, premiums peaked at over 1 billion yuan in 2020. But since 2021, premiums have been declining year after year, dropping from 624 million yuan in 2021 to 333 million in 2024, with a slight rebound to 633 million in 2025.

In 2025, the company’s shareholding structure changed significantly, with major state-owned shareholders taking control, forming a governance structure dominated by Chongqing state assets.

The competitive environment remains tough for regional small and medium insurers like Three Gorges Life, which must leverage regional advantages and strategic partnerships to survive and grow.