Xishui shares issued a performance pre-loss announcement on January 25. It is estimated that the net loss for 2020 will be about 8.736 billion yuan, and the net loss after deducting non-recurring gains and losses will be about 27.123 billion yuan, which is comparable to the -862 million yuan in the same period last year. The ratio decreased by about 3,047.72%.
In this response, Xishui shares once again pointed out that the main reason for the huge loss in 2020 was that the subsidiary Tianan Property & Casualty Insurance made 57.745 billion yuan in impairment of investment assets in the first half of the year. As of the close on February 18, the latest market value of Xishui shares was only 3.5 billion yuan.
Three factors drag down performance
The large losses of Xishui Co., Ltd. in 2020 are all due to the company’s Tianan Property Insurance investment stepping on thunder. Xishui shares directly holds 35.88% of Tian’an P&C Insurance, and indirectly holds 14.99% of Tian’an P&C’s equity through its three partnerships, Hengjin Yusheng, Jin Ao Kaida, and Guoya Chuanghao, and holds and controls them in total. 50.87% equity.
In response to the large losses of Xishui’s 2020 performance, the Shanghai Stock Exchange required it to verify and supplement to disclose the specific reasons, and in the 2020 annual report, the company’s ability to continue operations fully indicated the risks. Xishui shares replied that the company’s large losses in 2020 are mainly caused by the following three reasons:
1. In the first half of 2020, the trust products and other assets held by Tianan Property & Casualty Insurance have materially defaulted after maturity. In order to truly reflect the financial status and operating conditions as of June 30, 2020, Tianan Property & Casualty Insurance The relevant investment assets on the 30th were tested for impairment. After testing, there are signs of significant impairment for this type of investment. Tianan Property & Casualty Insurance made 57.745 billion yuan in investment asset impairment reserves, which will affect the net profit attributable to shareholders of listed companies in 2020 -20.724 billion yuan.
2. On June 30, 2020, Tianan Property & Casualty Insurance re-evaluated the equity investment funds held by Tianan Property and Casualty based on the market value of pledged stocks, etc., and the fair value change gains and losses were -7.941 billion yuan, affecting the shareholders of listed companies in 2020. Net profit was 2.849 billion yuan.
3. Tianan Property & Casualty Insurance’s net profit in the first half of the year was -64.670 billion yuan. Based on the shareholding ratio, the amount payable to the third-party investors of the structured entity under control (three partnerships LP) was -9.694 billion yuan, resulting in an excess loss of 3.152 billion yuan. Yuan is borne by the parent company and affects the net profit attributable to shareholders of the listed company-3.152 billion yuan.
However, in the previous announcement, Xishui Co., Ltd. believes that the company no longer has control over Tianan Property Insurance. According to the Accounting Standards for Business Enterprises, the company no longer includes Tianan Property Insurance in the consolidated financial statements. Equity investment is designated as a non-trading equity instrument investment and transferred to financial instrument accounting. After the accounting method was changed, the net profit attributable to shareholders of Xishui Co., Ltd. increased by 18.368 billion yuan.
Tianan Property & Casualty Insurance is carrying out asset and capital verification
In this inquiry, the Shanghai Stock Exchange requested Xishui to make additional disclosures on the company’s asset impairment measurement process, and fully demonstrate whether the amount of impairment provision is accurate and appropriate, and explain the specific time when the signs of impairment appear, and whether there is insufficient provision in the previous period And the situation of false previous performance or adjusted profit.
Xishui shares replied that Tianan Property & Casualty Insurance has carefully arranged relevant verification and other work in accordance with the requirements of the letter, but because the problem involves a large amount of work and needs further verification. Tianan Property & Casualty Insurance recently replied to the company: “On July 17, 2020, the China Banking and Insurance Regulatory Commission took over our company. Our company is carrying out the asset and capital verification work, and related matters are subject to further verification.” Therefore, our company will continue. Pay attention to the progress of the reply to the work letter, and timely fulfill the obligation of information disclosure.
According to public information, as of the end of 2019, Tianan Property & Casualty Insurance’s financial investment assets were 46.149 billion yuan, including collective trust investment plans, real estate investment plans, bank wealth management, and unlisted corporate equity. Among them, trust products amounted to 27.899 billion yuan, accounting for 57.36% of the entire financial investment assets.
Among them, all trust products are New Era Trust. As of June 30, 2020, Tianan Property & Casualty Insurance directly held 28 trust principals of 28.44 billion yuan, accrued interest of 1.176 billion yuan, and total principal and interest of 29.62 billion yuan. As of September 4, 2020, 16 trust products including the New Era Trust Blue Ocean Plan No. 1109, No. 1308, No. 1273, No. 1291 have overdue, and the overdue amount has reached 18.4 billion yuan.
The following is part of the new era trust situation invested by Tianan Property & Casualty Insurance:
Where are the tens of billions of trust plans invested? Xishui shares have announced that the new era trust products held by Tianan Property & Casualty Insurance are all new era collective fund trust plans. The underlying assets are unlisted equity assets, and each trust product has equity pledges and other guarantee credit enhancement measures. However, from the preliminary verification, the collateral of the underlying assets may have insufficient guarantees, and its guarantee validity needs to be further verified.
Currently, New Era Trust and Tianan Property & Casualty Insurance are in a state of being taken over. On January 22, New Era Trust disclosed that, with the joint efforts of all parties, the company has basically completed its asset and capital verification work recently. Intermediary agencies are speeding up the drafting of relevant written reports to provide the basis and foundation for the next stage of work such as formulating payment plans and advancing risk treatment. At present, under the guidance of the custody team, the company has simultaneously carried out related work such as contacting strategic investors and developing risk mitigation plans.
Report multiple errors regularly
In response to the fact that Xishui shares had made many major errors in the preparation of regular reports, the Shanghai Stock Exchange also required Xishui shares to verify the reasons and prevent similar incidents from happening again.
For example, the previous Tianan Property & Casualty Insurance’s annual report error also affected Xishui’s financial report. In response, Xishui shares replied that the 2020 semi-annual report of its subsidiary Tianan Property & Casualty Insurance has retrospectively adjusted the major accounting errors in 2018 and 2019. According to relevant regulations, the company has corrected this and retrospectively adjusted 2018 and 2019. Annual financial statements.
In the latest three quarterly reports, the financial staff did not include the investment income generated by the changes in Tianan Property & Casualty Insurance’s accounting method as non-recurring gains and losses, resulting in errors in the relevant data in the three quarterly reports. Later, according to the correction, in the first three quarters of 2020, the net profit of Xishui shares attributable to shareholders of listed companies after deducting non-recurring gains and losses was changed from -8.749 billion yuan to -27.118 billion yuan.
Xishui shares stated that after the disclosure of the third quarter report for 2020, the company self-examined and found errors in the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses, and then corrected the above-mentioned errors. This correction does not affect the company’s March 2020 Consolidated quarterly report data.
Xishui shares stated that in the future, the company will further enhance the internal control awareness of all personnel, at the same time strengthen internal control management and accounting management, strengthen the popularization and training of internal control systems, and improve internal control capabilities, and in accordance with the guidelines of the “Enterprise Accounting Standards” , Continuously improve the accounting management level and the quality of accounting information to avoid similar situations.
Reprint indicated source：Spark Global Limited information