China’s Ping An Insurance plans more overseas investment in properties and logistic real estate
Ping An Insurance has set its sights on overseas properties, logistics-related real estate and listed companies that promise high returns as it looks to deepen its involvement in global markets, now that mainland insurance firms are being encouraged to venture out and put their huge capital reserves to good use.
The nation’s second-largest insurer now invests less than 2 per cent of its assets overseas, far below the 15 per cent allowed by mainland authorities, giving it plenty of scope to spend.
“We have just started investing overseas and foreign assets account for less than 2 per cent of our portfolio. This is far from the 15 per cent cap so that we have a lot of room for overseas investment. We however do not target to invest up to the cap,” Lee Yuansiong, executive director and chief insurance business officer of Ping An, told the South China Morning Post in an exclusive interview.
In 2012 Beijing announced it would allow insurance companies to invest up to 15 per cent of their assets overseas in a plan to encourage companies to seek growth beyond the domestic market.
Since then, Shenzhen-based Ping An joined hands with top rival China Life in May last year to fund part of a US$500 million commercial real-estate project to be built in Boston by US developer Tishman Speyer Properties.
It also bought Tower Place in London’s City financial district from Deutsche Asset & Wealth Management for £327 million (HK$3.87 billion) last year, after it had bought the iconic Lloyd’s building for £260 million in its first overseas foray in 2013.
Lee said however that since most of the insurer’s liabilities for its policies are in Chinese yuan, it needs to be cautious.
“As such, we could not invest too much in overseas assets as this would leave us exposed to currency mismatch risks. Most insurance companies would invest only a single digit percentage of their assets overseas and Ping An is likely to follow this practise,” he said. He added that property investment is a natural choice for insurers because they invest for the very long term.
On average, life insurance companies need to pay policyholders 17 years after they take out policies, so investment choices would be long-term projects.
While the company also invests in logistics real estate, Lee said Ping An has no intention to be a logistics operator, only an investor in related properties.
In October it announced the launch of a joint venture in the United States to buy long-term high-quality assets, and has committed to an initial investment in a logistics portfolio of more than US$600 million.
The venture, with US property fund Blumberg Investment Partners, has also identified US$400 million worth of other properties for further investment.
This marks the first significant Chinese outbound investment in the Western logistics sector.
“The growing popularity of e-commerce has led to a strong demand for logistics properties and warehouses. These properties are very good long-term investments. Many are located in the outskirts of city centres nowadays but when cities expand in about 20 years time, these areas may well become the city centres and the value of these properties would grow substantially,” Lee said.
He said Ping An has no intention in investing in other areas of the logistics business because it wants to focus on its core financial businesses of insurance, banking and asset management.
The company now has 109 million customers, with half of them high-net-worth clients.
While some insurers invest in hotel projects, Ping An is not interested in following the trend.
“It is very challenging to manage a hotel business,” Lee said.
He said the company would also like to invest in high quality overseas-listed companies which have good management and could provide a good return.
Overall, Lee said the major challenges for mainland companies in investing overseas would be management issues.
“It needs professional management for overseas investment. We need to have a team of professionals who have the capability and experience to manage investment assets overseas. We need to work with partners who have good track records and good management teams,” he said.