Regulator Probing Ping An Insurance

China's banking and insurance sector regulator is probing Ping An Insurance Group Co of China Ltd's investments in the property market after the firm took a big profit hit from a soured bet. The China Banking and Insurance Regulatory Commission (CBIRC) has also ordered the insurer to stop selling alternative investment products, which are typically tied to the property market.

Ping An claimed its real estate exposure was significantly lower than the regulatory cap. The regulatory move comes after Ping An, the country's biggest insurer by assets, in February disclosed a 54 billion yuan ($8.4 billion) exposure to the indebted China Fortune Land Development Co Ltd.

Ping An made adjustments to its earnings figures including booking impairment provisions of 35.9 billion yuan for investments related to China Fortune in the first half of 2021, which contributed to a 15.5% fall in its net profit in the January to June period.

China Fortune, a developer of industrial parks and urban real estate, said it had overdue debt and interest worth 69.2 billion yuan as of June-end, and that default and liquidity stress could impact its operations and financing.

The regulatory probe into Ping An's property portfolio also comes against the backdrop of Beijing sharpening its scrutiny of the country's red-hot real estate market by tackling unbridled borrowing that has fuelled concern about financial risk.

The government has been working to curb unregulated credit flows into the property market. And as new rules choke off shadow lending to developers, the squeeze is increasing the risk of default for some of the country's biggest property players.

The insurance regulator's investigation into Ping An, the only insurer designated as systemically important, aims to uncover and contain risk connected to its property investment portfolio. The insurer's total real estate-related exposure is 185.5 billion yuan, weighing roughly equally on equities, debt and investment properties and accounting for around 4.8% to 4.9% of its 3.8 trillion yuan total investment portfolio.

Property Exposure - The regulator's latest on-site probe into Shenzhen-based Ping An, whose shares are down more than 40% this year, started this month. CBIRC in February ordered the insurer to halt the sale of so-called alternative investment products, leaving dozens in a team set up for the purpose without work.

Ping An's other property investments include 14.1% of the shares in China Jinmao Holdings Group Ltd, 8% of Country Garden Holdings Co Ltd and 6.54% of CIFI Holdings (Group) Co Ltd, showed Refinitiv data based on company filings.