EXCLUSIVE China regulator probes Ping An Insurance coverage’s property investments -sources

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The corporate emblem of Ping An Insurance coverage is seen in Beijing, China, Aug. 27, 2020. REUTERS/Thomas Peter/File Photograph

SHANGHAI, Aug 31 (Reuters) – China’s banking and insurance coverage sector regulator is probing Ping An Insurance coverage Group Co of China Ltd’s (601318.SS) investments within the property market, two folks with data 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 folks, who declined to be recognized as the knowledge 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 largest insurer by belongings, in February disclosed a 54 billion yuan ($8.4 billion) publicity to the indebted China Fortune Land Improvement Co Ltd (600340.SS).

Ping An made changes to its earnings figures together with reserving impairment provisions 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 in opposition to 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 danger.

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 few of the nation’s largest property gamers.

The insurance coverage regulator’s investigation into Ping An, the one insurer designated as systemically essential, goals to uncover and comprise danger related to its property funding portfolio, mentioned the folks.

The insurer’s complete 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 complete funding portfolio, in keeping with a Citi analysis word.

The Shanghai-listed shares of Ping An fell as a lot as 3.2% on Tuesday after the information to their lowest value in 4 years.

In a brand new assertion on Tuesday, Ping An mentioned it has been “strictly following the related laws” in its investments, and that it didn’t touch upon market rumours.

PROPERTY EXPOSURE

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 folks, 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 workforce 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 (0817.HK), 8% of Nation Backyard Holdings Co Ltd (2007.HK) and 6.54% of CIFI Holdings (Group) Co Ltd (0884.HK), confirmed Refinitiv knowledge primarily based on firm filings.

China’s insurers have been busy unwinding or reducing their publicity to builders this yr, mentioned two individuals who work at mid-sized insurance coverage companies.

“All I have been doing is travelling to fulfill our totally different developer purchasers this yr in several elements to China to inform them we will not finance them anymore,” mentioned one one who works at certainly one of China’s high 10 insurance coverage companies.

“We’re reducing our publicity as a part of our inside technique,” the individual mentioned.

Reporting by Engen Tham and Zhang Yan in Shanghai and Kane Wu in Hong Kong; Additioanl Reporting by Cheng Leng; Enhancing by Sumeet Chatterjee and Christopher Cushing

Our Requirements: The Thomson Reuters Belief Rules.

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