SHANGHAI, Aug 31 (Reuters) - 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 https://www.reuters.com/article/us-china-developer-ping-an-of-china-debt-idUSKBN2A40HQ
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.
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.
(Reporting by Engen Tham and Zhang Yan in Shanghai and Kane Wu
in Hong Kong; Additioanl Reporting by Cheng Leng; Editing by
Sumeet Chatterjee and Christopher Cushing)