China regulator said to probe Ping An Insurance’s property investments

FILE PHOTO: The company logo of Ping An Insurance is seen in Beijing, China, Aug. 27, 2020. REUTERS/Thomas Peter/File Photo

China’s banking and insurance sector regulator is probing Ping An Insurance Group Co of China Ltd’s investments in the property market, two people with knowledge of the matter said, after the firm took a big profit hit from a soured bet.

The China Banking and Insurance Regulatory Commission (CBIRC) has also ordered the insurer to stop selling alternative investment products, which are typically tied to the property market, said the people, who declined to be identified as the information is not public.

Ping An in a statement said its real estate exposure was significantly lower than the regulatory cap. It did not respond to queries on the regulatory probe. The CBIRC did not respond to a request for comment.

The regulatory move comes after Ping An, the country’s biggest insurer by assets, in February disclosed a 54 billion yuan ($8.4 billion) exposure to the indebted China Fortune Land Development Co Ltd.

Ping An made adjustments to its earnings figures including booking impairment provisions https://www.reuters.com/article/ping-an-results-idUSL1N2PX0KA of 35.9 billion yuan for investments related to China Fortune in the first half of 2021, which contributed to a 15.5% fall in its net profit in the January to June period.

China Fortune, a developer of industrial parks and urban real estate, said it had overdue debt and interest worth 69.2 billion yuan as of June-end, and that default and liquidity stress could impact its operations and financing.

The regulatory probe into Ping An’s property portfolio also comes against the backdrop of Beijing sharpening its scrutiny of the country’s red-hot real estate market by tackling unbridled borrowing that has fuelled concern about financial risk.

The government has been working to curb unregulated credit flows into the property market. And as new rules choke off shadow lending to developers, the squeeze is increasing the risk of default for some of the country’s biggest property players.

The insurance regulator’s investigation into Ping An, the only insurer designated as systemically important, aims to uncover and contain risk connected to its property investment portfolio, said the people.

The insurer’s total real estate-related exposure is 185.5 billion yuan, weighing roughly equally on equities, debt and investment properties and accounting for around 4.8% to 4.9% of its 3.8 trillion yuan total investment portfolio, according to a Citi research note.

The Shanghai-listed shares of Ping An fell as much as 3.2% on Tuesday after the news to their lowest price in four years.

In a new statement on Tuesday, Ping An said it has been “strictly following the relevant regulations” in its investments, and that it did not comment on market rumours.

PROPERTY EXPOSURE

The regulator’s latest on-site probe into Shenzhen-based Ping An, whose shares are down more than 40% this year, started this month, said one of the people, adding the CBIRC has been requesting documents since earlier this year.

Also, the CBIRC in February ordered the insurer to halt the sale of so-called alternative investment products, leaving dozens in a team set up for the purpose without work, they said.

Ping An’s other property investments include 14.1% of the shares in China Jinmao Holdings Group Ltd, 8% of Country Garden Holdings Co Ltd and 6.54% of CIFI Holdings (Group) Co Ltd, showed Refinitiv data based on company filings.

China’s insurers have been busy unwinding or cutting their exposure to developers this year, said two people who work at mid-sized insurance firms.

“All I’ve been doing is travelling to meet our different developer clients this year in different parts to China to tell them we can’t finance them anymore,” said one person who works at one of China’s top 10 insurance firms.

“We’re cutting our exposure as part of our internal strategy,” the person said.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.