Fore­sea Life pledges ‘con­sol­i­da­tion’

China Daily (Hong Kong) - - BUSINESS - By LI XIANG lix­i­ang@chi­

Fore­sea Life In­sur­ance Co, a unit of pri­vate con­glom­er­ate Bao­neng Group, said on Tues­day it will “con­sol­i­date” its uni­ver­sal life in­sur­ance busi­ness to meet reg­u­la­tory re­quire­ments by the end of this month.

The move comes in re­sponse to the sus­pen­sion by the reg­u­la­tor of sales of its con­tro­ver­sial prod­ucts.

The Shen­zhen-based in­surer re­sponded thus af­ter the fi­nan­cial reg­u­la­tors stepped up ef­forts to rein in risks as­so­ci­ated with the surge in stake-buy­ing of listed com­pa­nies’ shares by in­sur­ance funds.

The buy­outs have largely been funded by cap­i­tal through sales of uni­ver­sal life in­sur­ance, a type of flex­i­ble in­sur­ance pol­icy that of­fers life pro­tec­tion in ad­di­tion to in­vest­ment re­turns.

The in­surer said it has a rel­a­tively strong abil­ity to man­age liq­uid­ity risks, ac­cord­ing to me­dia re­ports that cited an un­named source at the in­surer.

Fore­sea Life, con­trolled by ty­coon Yao Zhen­hua, gained promi­nence in its high-profile stake pur­chase of es­tate de­vel­oper China Vanke Co Ltd, which re­sulted in a power strug­gle with Vanke’s ex­ist­ing man­age­ment.

The in­surer has also been build­ing up its stakes in some blue-chips, in­clud­ing Gree Elec­tric Ap­pli­ances Inc and medicine firm Dong-EE-Jiao Co Ltd.

These pur­chases by Fore-

The reg­u­la­tor has adopted a tougher stance to­ward spec­u­la­tive trad­ing by in­sur­ers.” Li Lifeng, an an­a­lyst at Si­no­link Se­cu­ri­ties Co

sea Life have caught the reg­u­la­tor’s at­ten­tion, spark­ing fears that they will fan spec­u­la­tion in the mar­ket and threaten the man­age­ment of pub­lic com­pa­nies.

The China In­sur­ance Reg­u­la­tory Com­mis­sion on Mon­day sus­pended Fore­sea Life’s sales of uni­ver­sal life in­sur­ance prod­ucts. The reg­u­la­tor also sus­pended on­line sales of in­sur­ance prod­ucts by six ma­jor in­sur­ers, in­clud­ing Fore­sea Life and Ever­grande Life In­sur­ance Co.

The CIRC sent in­spec­tion teams to Fore­sea Life and Ever­grande Life, ac­cord­ing to a 21st Cen­tury Busi­ness Her­ald re­port.

Li Lifeng, an an­a­lyst with Si­no­link Se­cu­ri­ties Co Ltd, said that the reg­u­la­tor’s tough stance re­flects its de­sire to curb spec­u­la­tion.

“The reg­u­la­tor has adopted a tougher stance to­ward the spec­u­la­tive trad­ing by in­sur­ers. We ex­pect that pur­chases of stakes in listed com­pa­nies by in­sur­ance firms in the pub­lic mar­ket will slow down,” Li said.

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