SHANGHAI (Reuters) – China’s banking and insurance coverage sector regulator is probing Ping An Insurance coverage Group Co of China Ltd’s investments within the property market, two individuals with information of the matter mentioned, after the agency took an enormous revenue hit from a soured guess.
The China Banking and Insurance coverage Regulatory Fee (CBIRC) has additionally ordered the insurer to cease promoting different funding merchandise, that are usually tied to the property market, mentioned the individuals, who declined to be recognized as the data just isn’t public.
Ping An in a press release mentioned its actual property publicity was considerably decrease than the regulatory cap. It didn’t reply to queries on the regulatory probe. The CBIRC didn’t reply to a request for remark.
The regulatory transfer comes after Ping An, the nation’s greatest insurer by belongings, in February disclosed right here a 54 billion yuan ($8.4 billion) publicity to the indebted China Fortune Land Improvement Co Ltd.
Ping An made changes to its earnings figures together with reserving impairment provisions right here of 35.9 billion yuan for investments associated to China Fortune within the first half of 2021, which contributed to a 15.5% fall in its internet revenue within the January to June interval.
China Fortune, a developer of business parks and concrete actual property, mentioned it had overdue debt and curiosity value 69.2 billion yuan as of June-end, and that default and liquidity stress may influence its operations and financing.
The regulatory probe into Ping An’s property portfolio additionally comes towards the backdrop of Beijing sharpening its scrutiny of the nation’s red-hot actual property market by tackling unbridled borrowing that has fuelled concern about monetary threat.
The federal government has been working to curb unregulated credit score flows into the property market. And as new guidelines choke off shadow lending to builders, the squeeze is growing the danger of default for a number of the nation’s greatest property gamers.
The insurance coverage regulator’s investigation into Ping An, the one insurer designated as systemically vital, goals to uncover and comprise threat linked to its property funding portfolio, mentioned the individuals.
The insurer’s whole actual estate-related publicity is 185.5 billion yuan, weighing roughly equally on equities, debt and funding properties and accounting for round 4.8% to 4.9% of its 3.8 trillion yuan whole funding portfolio, in accordance with a Citi analysis be aware.
The regulator’s newest on-site probe into Shenzhen-based Ping An, whose shares are down greater than 40% this yr, began this month, mentioned one of many individuals, including the CBIRC has been requesting paperwork since earlier this yr.
Additionally, the CBIRC in February ordered the insurer to halt the sale of so-called different funding merchandise, leaving dozens in a group arrange for the aim with out work, they mentioned.
Ping An’s different property investments embrace 14.1% of the shares in China Jinmao Holdings Group Ltd, 8% of Nation Backyard Holdings Co Ltd and 6.54% of CIFI Holdings (Group) Co Ltd, confirmed Refinitiv information based mostly on firm filings.
China’s insurers have been busy unwinding or slicing their publicity to builders this yr, mentioned two individuals who work at mid-sized insurance coverage companies.
“All I’ve been doing is travelling to satisfy our completely different developer shoppers this yr in several elements to China to inform them we will’t finance them anymore,” mentioned one one who works at one in every of China’s high 10 insurance coverage companies.
“We’re slicing our publicity as a part of our inner technique,” the individual mentioned.
Reporting by Engen Tham and Zhang Yan in Shanghai and Kane Wu in Hong Kong; Additioanl Reporting by Cheng Leng; Modifying by Sumeet Chatterjee and Christopher Cushing