China’s Ping An Insurance doubled its foreign asset allocation to 4.2% in the first half of this year and aims to further raise it to as much as 10% of its current Rmb1.83 trillion ($276 billion) in assets under management in the next three to five years. 

That means the firm, the second biggest mainland insurer, could invest $16 billion (or more, depending on overall AUM growth) overseas in that time. And it will seek external managers to help it do so, said chief investment officer Timothy Chan yesterday.

Ping An doubled its foreign assets to Rmb77 billion as of June 30, from Rmb39.8 billion at end-2015. The group has already earmarked another Rmb40 billion for overseas investments, which will boost its foreign exposure to Rmb120 billion or around a 7% allocation this year. These moves follow comments made by Chan in March that it would be ramping up its offshore allocation.

The insurer saw its investable assets grow 5.4% in the first half to Rmb1.83 trillion. The portfolio, which includes the group’s life and property-and-casualty assets, generated a gross return of 4.4% in the same period, down from 7.7% in H1 2015. The drop in returns was mainly driven by losses in equity exposure. Still, Ping An outperformed the industry’s average return of 2.47% for the first half, as reported.

Ping An’s investment strategy is likely to put it well ahead of its peers in terms of offshore allocation, as the mainland insurance industry’s foreign exposure stood at less than 2% as of June, according to the China Insurance Regulatory Commission (CIRC). 

The CIRC had raised the limit on mainland insurers’ overseas allocation from 5% to 15% in October 2012, but they have been slow to capitalise on this in the past few years. This was partly down to a lack of familiarity with foreign investments, but more importantly because insurers had been able to obtain decent returns onshore. But yields are harder to come by now, so they have widened their scope.

Industry participants have been expecting insurers to take bigger steps overseas due to various factors in the past year or so, including renminbi depreciation, the volatile A-share market and declining onshore bond yields, as reported.

Chan did not comment on the overseas assets the firm was looking to invest in, which it does via its offshore arm, Ping An of China Asset Management (Hong Kong). But he stressed the importance of seeking stable yields from fixed income assets.

Market observers said Chinese insurers were adding exposure in Hong Kong equities through the Stock Connect southbound and in direct private investments, real estate and multi-asset strategies.

Alternative assets now account for a third of mainland insurers’ portfolios, as reported. This covers non-standard assets such as long-term equity investments (stakes in both listed and unlisted companies), banking wealth management products, trusts, private equity, venture capital, loans and real estate.

Chinese insurance investors, including China Life and Ping An, are joining AsianInvestor’s China Global Investment Form in Beijing, September 22nd. For further information please visit www.china-investmentforum.com