China Life misused funds to build tower
Auditor uncovers 5.4 billion yuan in irregularities at China's largest insurer
China's largest life insurer misused 750 million yuan to build a Beijing office tower before its initial public offering last year, mainland legislators were told this week.
The abuse was among a series of irregularities the National Audit Office found at China Life Insurance Co (CLIC) before it spun off part of its business for a dual listing last year in Hong Kong and New York, a State Council report to the National People's Congress said.
State auditors found irregularities totalling 5.4 billion yuan at the insurer.
Although the office tower housed the firm's Beijing headquarters, some of its floor space was rented to outside tenants and it is therefore considered a commercial property investment.
Chinese law bars insurers from putting insurance funds into commercial property and other investments unrelated to their core business.
CLIC was split into two companies - listed vehicle China Life Insurance, whose headquarters is still in the same office tower, and parent China Life Insurance (Group) - just before the flotation.
According to the China Business Times, China Life Group has worked out a plan to have the funds invested in the property returned.
'The property was passed on to the group company during our [pre-float] restructuring,' a spokesman for the listed firm said. 'We are just one of the tenants and should not be affected [by the findings].'
China Life Group officials could not be reached for comment yesterday.
Meanwhile, the China Life spokesman denied any knowledge that the US Securities and Exchange Commission had upgraded an informal inquiry into the circumstances surrounding its share offering, the world's largest last year, to a formal investigation, as reported in the Financial Times.
'We've asked our lawyers and no one has heard anything about it,' he said.
The upgrade would give the SEC's enforcement division power to compel witness testimony and subpoena documents.
