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Insurers eager to invest in real estate market
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08:35, September 29, 2009

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People's Insurance Company of China (PICC), the nation's largest insurance conglomerate, is eyeing investment opportunities in economically affordable housing, the company's President Wu Yan said yesterday.

Several insurers are eager to make a similar move after a new law allowing it comes into effect on Oct 1.

Real estate, usually a long-term investment, is a perfect match for life insurers' long-term liabilities.

"As for the property investment, we are quite interested in economically affordable housing as risks for such investment are foreseeable and controllable," Wu said, adding risk control is the primary concern when PICC explores this new investment channel.

Though the China Insurance Regulatory Commission, the industry watchdog, hasn't revealed the detailed regulations on insurers' investment in the real estate sector, industry insiders said insurers might not be allowed to get involved in the property development area. Insurers cannot sell property within three years of the deal being inked if it is an equity investment.

"More concrete moves could be made after the regulator publishes the detailed regulations," Wu said. "We will run property investment through the PICC Investment Holding Company. In fact, there are currently thousands of properties under PICC's name."

According to a report from Jones Lang LaSalle (JLL), an international real estate service provider, mainland insurance companies could potentially acquire domestic real estate worth 236 billion yuan if 15 percent of their total assets is invested into this area. Based on current average capital value, this equates to more than twice the value of the Shanghai Grade A office market, or 165 times the value of the Tianjin Grade A office market.

Ping An, for example, invested more than 4 billion yuan in domestic real estate in 2007 through its investment arm Ping An Trust & Investment Company.

Meanwhile, PICC is also looking for a strategic investor before the insurer float shares as a whole next year.

The criteria for selecting the strategic partner, Wu said, include the effect of strategic and business cooperation, the financial return and the overall strategic planning of PICC.

"Under similar conditions, we will give priority to considering a domestic strategic investor that can coordinate with PICC in terms of capital and business," Wu said. 'The domestic investor could be a financial institution or an industrial company."

According to Wang Xiaogang, senior analyst with Shanghai-based Orient Securities, a national bank would be a good choice as it could bring customers and a marketing channel to PICC, which could help the insurer boost business in the short term.

Source:China Daily

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