China Life Insurance Co, with about US$26 billion of assets under management, will trim share investments to cut risk after the stock market tumbled 20 percent since tripling in the first 10 months of the year.
"Other Chinese insurers may be happy living with rollercoaster ups and downs in their performance, but China Life will not be," President Wan Feng said at a presentation in Nanjing, capital in Jiangsu Province on the Yangtze River northwest of Shanghai, yesterday. "For us, stability is key."
The insurer will cut its investments in stocks and mutual funds, and aims for strategic equity stakes to make up five percent to 10 percent of its portfolio, Chief Investment Officer Liu Lefei said. China Life will look for infrastructure and financial acquisitions, he said.
The insurer may buy foreign financial companies as it expands, Chairman Yang Chao said at the briefing. "Our investments are focused on stocks and funds right now, and we're looking to trim these, especially funds, to move more into long-term strategic equity stakes," Liu said. "Infrastructure deals look attractive because they offer stable returns, while buying into other financial institutions would offer synergies with our business."
The world's largest insurer by market value joined investor Warren Buffett and former Federal Reserve Chairman Alan Greenspan in casting doubt on the sustainability of China's stock market rally. The nation's stocks, on average, remain the most expensive among the world's largest markets even after the key CSI 300 Index slumped from October's peak, Bloomberg News said.
"China Life will still be earning money even if the stock market tanks to 2,000 points," said Yang. "We bought into the stocks very early at cheap prices."
China's insurance regulator wants firms to spread risk on their more than US$300 billion of assets. In July, China allowed the nation's insurers to invest 15 percent of their assets in overseas stocks and bonds, up from five percent.
China Life has more than US$1 billion in Hong Kong stocks among its 194 billion (US$26 billion) of total assets under management.
The insurer is seeking stakes in ports, energy firms and airports, Liu said. It also may invest in the restructuring of large state firms, he said.
(Shanghai Daily November 29, 2007)
