Tortoise and Hare

Steady On Wins in China

New rules mean smaller players will have their work cut out meeting yield guarantees.

China's big insurers can rest easy.

Rules released late Tuesday by the China Insurance Regulatory Commission are aimed squarely at reining in the industry's fast-growing upstarts and making it harder for them to sell the sort of high-risk policies that helped fund acquisitions at home and abroad.

The likes of Foresea Life Insurance Co., Huaxia Life Insurance Co. and Anbang Insurance Group Co. should watch out. Anbang, for example, started out as a provincial car insurer in 2004. In the 11 months through November, it sold more insurance policies than stalwarts such as China Pacific Insurance Co. and New China Life Insurance Co.

Came From Nowhere

During the first 11 months of 2016, newer players such as Anbang Life and Funde Sino were among the biggest sellers of insurance policies in China

Source: Bloomberg Intelligence, China Insurance Regulatory Commission

Note: Policy sales include both universal life policies and traditional protection. Anbang Group owns Anbang Life and Hexie Health.

Now, no insurer will be able to buy more than 5 percent of a listed firm without regulatory approval. Insurers also won't be able to team with non-insurance companies to buy stakes, a tactic used by Foresea Life's parent Baoneng Group in its pursuit of China Vanke Co.

Nice Work

Anbang Group's two units, Anbang Life and Hexie Health, sold almost three times the universal-life policies in the first 11 months of 2016 as they did in the same period of 2015

Source: Bloomberg Intelligence, China Insurance Regulatory Commission

With big positions in listed stocks out of the picture as an investment option, China's smaller insurers will have their work cut out meeting the yield guarantees they've doled out when selling universal life policies. One trick that'll also no longer work: Buying a significant enough stake to get a board seat and then influencing dividends.

Larger players meanwhile, like state-owned China Life Insurance Co. and Ping An Insurance Co., won't be affected as much. They're already seeing their fortunes improve as yields on bonds -- their biggest investment -- rise, while equities exposure is relatively low.

Another plus: The limit on single-stock exposure, capped at 5 percent of total assets, doesn't apply to bank holdings. Chinese bank shares are a great source of high dividends and steady returns, so perhaps it's no coincidence that the nation's largest firms have been snapping up shares in lenders. Citigroup Inc. sold its 20 percent stake in China Guangfa Bank Co. to China Life Insurance last year while PICC Property & Casualty Co. is buying Deutsche Bank AG's interest in Huaxia Bank Co.

Ties to Donald Trump's son-in-law might be able to smooth the way for Anbang as it continues to venture beyond China's borders, but the same probably can't be said for its contemporaries. In China's scrappy insurance industry, state-owned and steady-as-she-goes looks to be winning the race.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Nisha Gopalan in Hong Kong at

    To contact the editor responsible for this story:
    Katrina Nicholas at

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