China’s EXCLUSIVE regulator probes Ping An Insurance real estate investments -sources
SHANGHAI, Aug.30 (Reuters) – China’s banking and insurance regulator is investigating Ping An Insurance Group Co of China Ltd (601318.SS) investments in the real estate market, said two people with knowledge of the matter, after the company took a big profit hit from a sour bet.
The China Banking and Insurance Regulatory Commission (CBIRC) also ordered the insurer to stop selling alternative investment products, which are usually tied to the real estate market, said the people, who declined to be identified because the information is not public.
Ping An said in a statement that its real estate exposure was significantly below the regulatory cap. He did not respond to questions about the regulatory probe. The CBIRC did not respond to a request for comment.
The regulatory move comes after Ping An, the country’s largest insurer by assets, in February disclosed 54 billion yuan ($ 8.4 billion) exposure to indebted China Fortune Land Development Co Ltd. (600340.SS).
Ping An adjusted its results, including recording an impairment charge of 35.9 billion yuan for investments related to China Fortune in the first half of 2021, which contributed to a 15.5% decline in its net profit from January to June.
China Fortune, a developer of industrial parks and city real estate, said it had past due debt and interest worth 69.2 billion yuan at the end of June, and that the default and liquidity stress could have an impact on its operations and funding.
The regulatory investigation into Ping An’s real estate portfolio also comes as Beijing is refining its examination of the country’s scorching real estate market by tackling the rampant borrowing that has fueled concerns about financial risk.
The government has worked to curb unregulated credit flows into the real estate market. And as new rules stifle shadow developer loans, the squeeze increases the risk of default for some of the nation’s biggest real estate players.
The insurance regulator’s investigation of Ping An, the only insurer designated as systemically important, aims to uncover and contain risks to its real estate investment portfolio, the public said.
The insurer’s total exposure related to real estate is 185.5 billion yuan, weighing roughly equally in stocks, debt and investment property and accounting for around 4.8% at 4, 9% of its total investment portfolio of 3.8 trillion yuan, according to a Citi research note.
EXHIBITION OF THE PROPERTY
The regulator’s latest on-site investigation into Shenzhen-based Ping An, whose shares are down more than 40% this year, began this month, one of the people said, adding that the CBIRC was asking for documents. since the beginning of this year.
In addition, the CBIRC in February ordered the insurer to halt the sale of so-called alternative investment products, leaving dozens of a dedicated team without work, they said.
Ping An’s other real estate investments include 14.1% of the shares of China Jinmao Holdings Group Ltd (0817.HK), 8% of Country Garden Holdings Co Ltd (2007.HK) and 6.54% of CIFI Holdings (Group) Co Ltd (0884. HK), showed Refinitiv data based on company filings.
Chinese insurers have been busy cutting or reducing their exposure to developers this year, said two people working at midsize insurance companies.
“All I have done is travel to meet our different developer clients this year in different parts of China to tell them that we can no longer fund them,” said a person who works in one of the 10 largest insurance companies in China.
“We are reducing our exposure as part of our internal strategy,” the person said.
Reporting by Engen Tham and Zhang Yan in Shanghai and Kane Wu in Hong Kong; Additional reporting by Cheng Leng; Editing by Sumeet Chatterjee and Christopher Cushing
Our Standards: Thomson Reuters Trust Principles.