China's major life insurers are preparing to launch overseas investments after the industry regulator allows them to invest 15 percent of total assets abroad, up from 5 percent now.

 

Ping An Insurance (Group) Co, the country's second-largest life insurer, plans to broaden its overseas investment portfolio into the foreign financial sector and overseas infrastructure once it gets the go-ahead from the China Insurance Regulatory Commission, Chief Operating Officer Louis Cheung said on Friday.

 

"We want to make our investment portfolio more balanced," Cheung said at a press conference in Hong Kong. "Investment channels like long-term corporate bonds are underdeveloped in China, so putting more money into overseas holdings will help cover our long-term liabilities."

 

Ping An currently has a US$1.7 billion quota under the qualified domestic institutional investor scheme, which allows it to buy overseas-listed mainland stocks.

 

The company's investment return for its overseas portfolio should be at least 4.5 percent, Cheung said.

 

China plans to issue rules within two months that allow insurers to diversify investments by putting as much as 15 percent of assets abroad, the industry regulator said on June 1.

 

That would allow China Life, with total assets exceeding 685 billion yuan at the end of last year, invest as much as 103 billion yuan overseas. Ping An, with assets of 494.3 billion yuan at the end of 2006, can invest up to 74 billion yuan.

 

Total assets of China's insurance sector stood at 1.97 trillion yuan at the end of last year, meaning around 300 billion yuan can be invested overseas.

 

But for smaller life insurers, the rule change doesn't seem so attractive.

 

"It doesn't mean a lot for us," the head of investment at a joint venture life insurer told China Daily. "On the one hand, the regulator hasn't published the detailed rule yet. On the other hand, we mainly focus on investment at home now. And we prefer to ask our foreign partner to manage it once we have investment overseas."

 

According to Yu Bin, an analyst with Shenyin & Wanguo Securities Co Ltd, equities will be the primary choice for insurers' overseas investments. "The rule helps life insurers boost their investment return and separate their risks," Yu said.

 

(China Daily June 5, 2007)