Regulator seeks Beijing nod for players to bet more on property, infrastructure assets Shares of mainland insurers surged yesterday after the insurance watchdog announced it would increase efforts to allow sector players to diversify investments into property, infrastructure and banks. The China Insurance Regulatory Commission said it was seeking State Council permission to let domestic insurers invest more in property and infrastructure projects as part of a broader drive to reduce their exposure to equities in a weak market. 'Mainland insurers were only allowed to invest in real estate for their own use in the past,' CIRC spokesman Yuan Lin said yesterday. 'Now, they are able to boost investment returns through strategic investments in this sector.' In Shanghai, shares of China Life Insurance, the country's largest life underwriter, rose 7.52 per cent to 29.88 yuan (HK$33.35), while Ping An Insurance (Group), the second-largest insurer, gained 4.44 per cent to 60.71 yuan. In Hong Kong, China Life's H shares rose 2.79 per cent to HK$31.30, Ping An gained 5.01 per cent to HK$66.05 and PICC Property and Casualty, the country's largest non-life insurer, closed 4.62 per cent higher at HK$7.25. Mr Yuan said the regulator would like to involve more insurers in the pilot investment diversification programme and increase the size of the stakes to be taken. This year, investment income of mainland insurers is expected to be affected, given that the Shanghai stock market's capitalisation shrunk 34 per cent in the first quarter. For insurers, the average investment yield in the first three months was 1.2 per cent, or 4.8 per cent on an annualised basis. Such a yield is much lower than last year's record of 10.9 per cent. 'Although interest income on debt securities and bank deposits should continue to benefit from the rising interest-rate environment in China, the benefit is likely to be too small to offset the significant equities gains in the past two years,' a JP Morgan research report said. In early 2006, the CIRC gave insurers the approval to make indirect investments in infrastructure. That year, China Life acquired a 32 per cent stake in China South Power Grid and made strategic investments in a few listed energy and transport companies. In July last year, Ping An invested 2.3 billion yuan in Shanxi Expressway. But the investments are considered trivial compared with the 2.7 trillion yuan in assets held by mainland insurers at the end of last month. By and large, their investments have been restricted to low-yield government bonds and savings accounts. 'Both China Life and Ping An will be the major beneficiaries of property investment as they have long-term funds to invest,' said Olive Xia, an analyst at Core Pacific-Yamaichi International. In December, Ping An was selected to invest 16 billion yuan in the Beijing-Shanghai High-Speed Railway, the state's largest mid-term railway project. China Life is absent from the railway investment list. Industry watchers expect it to join the project after getting the CIRC's blessings. The CIRC said it was in the process of choosing an experimental unit to enter the banking business. It signed a memorandum of understanding with the China Banking Regulatory Commission in January to allow more financial institutions to take stakes in insurers and vice versa. The CBRC has indicated it will allow four banks at most to enter the insurance business by taking stakes in mainland insurers.