Chinese insurer Ping An to continue investing in real estate after having learned its lesson with US$6.8 billion China Fortune Land debacle, co-CEO says

Name: Chinese real estate giants Evergrande and Kaisa continue unloading assets to cover debt
Uploaded: 2022-03-21T00:30:20.000Z
Duration: 3 min 2 s
Description: Chinese real estate giants Evergrande and Kaisa continue unloading assets to cover debt

Ping An will be more cautious in future investments, co-CEO Jessica Tan says

China’s largest insurer by market capitalisation reports a worse-than-expected 29 per cent decline in net profit for 2021

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Jessica Tan Sin-yin, Ping An’s co-CEO. Only about 5.5 per cent of the firm’s insurance investment portfolio has real estate exposure, she says. Photo: Jonathan Wong

Enoch Yiu

Published: 8:30am, 21 Mar 2022

Ping An Insurance (Group), China’s largest insurer by market capitalisation, will continue to invest in real estate despite having to make a massive provision for its holding in property firm China Fortune Land Development.

Ping An last week reported a worse-than-expected 29 per cent decline in net profit to 101.6 billion yuan (US$15.9 billion) for 2021. This was mainly because of a 43.2 billion yuan provision it had to make for its investments in Fortune Land, of which it is the largest shareholder with a 25.2 per cent stake.

The developer is struggling to repay the interest and principal of loans estimated to be worth 93.9 billion yuan.

“We will continue to invest in the real estate sector because China Fortune Land is just a single case. Unfortunately, it’s significant and we take lessons from it,” Jessica Tan Sin-yin, Ping An’s co-CEO, said during a phone interview with the South China Morning Post. “The lesson we have learned from this experience is not to have a high concentration of investment in a single company. We will be more cautious in our future investments, so as to prevent the same mistake from happening again.”

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Chinese real estate giants Evergrande and Kaisa continue unloading assets to cover debt

Fortune Land has been ensnared by China’s “three red lines” policy, put in place in August 2020 to control excessive leverage in the industry. The policy has shut many weak developers from the loans and bonds markets, amplifying a credit crunch at a time when a slowing economy has also crushed domestic home sales. The squeeze has led to major defaults at China Evergrande Group, Modern Land and Fantasia Holdings, among others.

Hong Kong lenders HSBC, Hang Seng Bank, Standard Chartered and Bank of East Asia (BEA) set aside at least US$1.02 billion last year to cover for risks arising from China’s real estate sector.