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Insurers under pressure

By Hu Yuanyuan (China Daily)
Updated: 2009-07-21 08:01

Children walk past a PICC logo. Chinese insurers have around 1.1 trillion yuan for investment this year. [CFP]

"There will be around 1.1 trillion yuan, or 30 percent of existing assets, available for investment this year, putting insurers under huge investment pressure," said Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC).

Since the returns on bonds may continue to decrease in the following months, insurers may increase their investments in the stock market, in infrastructure projects and in the property sector during the second half, industry insiders said.

"We are planning to invest more in stocks once the market undergoes some corrections," a manager at the Taikang Asset Management Co Ltd told China Daily.

As of the end of June, Chinese insurers had increased their investments by 10.4 percent from the beginning of this year. Bonds accounted for 50.2 percent, down 7.7 percentage points, and bank deposits 31 percent, up 4.5 percentage points, the CIRC said yesterday.

Among the investment portfolio, the proportion of stocks increased 1.9 percentage points to 9.8 percent, while mutual funds accounted for 6.8 percent, up 1.4 percentage points. The combined ceiling for these two types of investment is 20 percent.

In fact, the country's largest insurers, including China Life, Ping An and China Pacific Insurance, largely boosted their investments in the capital market in June.

An industry source said China Life spent 10 to 20 billion yuan buying mutual funds within just one week in June.

Related readings:  China's premium income tops $87.6b in first half  CIRC lifts ban on investment-linked insurance  Insurers hike Q1 stock holdings by 19%  Experts: Insurers investment return up 41%, but still weak

Thanks to the strong rebound in the capital markets, the whole industry may have doubled its profit to 26.1 billion yuan in the six months to June 30, with total premium income rising 6.6 percent to 598.6 billion yuan in the period, according to the CIRC.

Insurers invested 21 billion yuan in infrastructure projects in the first half of the year, chiefly in the transportation, telecommunications and energy sectors.

"As long as there are appropriate infrastructure projects, we will further increase our investments in that sector," the source from Taikang said.

Though the industry regulator hasn't released detailed regulations on insurers' investment in the property sector, a number of insurers have initiated preparatory work.

"We are in contact with several insurers who are seeking proper commercial properties, but they are still waiting for a better price as sliding rents have dented returns on investment," said Grant Ji, director of Savills (Beijing), a UK-based real estate service provider.