China Construction Bank

Insurers' securities investment rises 53pc

PUBLISHED : Friday, 29 June, 2007, 12:00am
UPDATED : Friday, 29 June, 2007, 12:00am

Companies target higher returns in home market

Cashed-up mainland insurers increased their investment in bonds and equities by 53 per cent to 1.5 trillion yuan in the first five months of the year, targeting higher returns in the domestic market.

Insurers including China Life Insurance and Ping An Insurance put more than 62 per cent of their total assets, 2.4 trillion yuan, into bonds, equities, property and infrastructure from January to May, according to the China Insurance Regulatory Commission.

China Life and Ping An, which have raised huge amounts of capital from the domestic market, are seeking better investment opportunities in the mainland to keep their assets from depreciating.

They have been buying stocks since the regulator lifted a ban on such investments in February 2005. Compared with the 53 per cent increase in stock and bond investments, bank deposits rose just 28 per cent to 700 billion yuan.

The mainland's insurance industry last year realised stock investment gains of 8.92 billion yuan, accounting for almost 10 per cent of their investment income, the regulator said earlier.

Though some insurers cut back on their equity investments this year due to concern about the overheating market, they retain more than 10 per cent of their assets in the domestic equity markets.

The companies are now eyeing overseas investments to diversify their assets in case of a slump in the mainland economy.

Mainland insurers will be given the green light to invest in overseas stocks under the qualified domestic institutional investors scheme within three months, CIRC deputy chairman Li Kemu said earlier. The amount insurers can invest is expected to be up to 15 per cent of their assets, or about 364 billion yuan.

China Life, the nation's biggest life insurer, raised its investment in equities, both publicly traded and private shares, and mutual funds to 13.9 per cent of its portfolio last year from 8 per cent in 2005.

It plans to step up its equity investment to support earnings growth, as shares listed in the mainland market were not expensive, chief investment officer Liu Lefei said in April.

China Life this week became the biggest shareholder in China Minsheng Banking Corp, the mainland's first privately owned lender, and also reportedly plans to buy stakes in provincial and city lenders.

Ping An, the second-largest, has said it may invest as much as 74 billion yuan overseas, preferably in financial institutions in emerging markets and infrastructure construction, after Beijing lifts the ban.

Total premiums in the first five months increased 28 per cent to 304 billion yuan, while claims rose 90 per cent to 99 billion yuan.

Stock focus

Local insurers last year gained 8.92 billion yuan from stock investments

Sum of insurers' securities investment the first five months, in trillion yuan: 1.5