Anbang Insurance Group Co. Ltd. has told S&P Global Market Intelligence that its recent sales of shares of major Chinese banks were not due to liquidity concerns. However, analysts have noted that the insurer may need to raise cash to deal with potential insurance policy surrenders and keep solvency ratios above regulatory requirements.
Anbang units Anbang Life Insurance Co. Ltd. and Hexie Health Insurance Co., Ltd. sold at least 6.64 billion yuan of shares in the four biggest Chinese banks — Agricultural Bank of China Ltd., China Construction Bank Corp., Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. — in the second quarter ended June 30, Caixin reported, citing regulatory filings.
This reportedly earned the units a profit of about 500 million yuan. The units meanwhile kept unchanged in this period a combined 15.5% stakeholding in China Minsheng Banking Corp. Ltd. and a 10.7% stakeholding in China Merchants Bank Co. Ltd.
"The share sales were purely part of normal market operations," an Anbang spokesman said. "It has nothing to do with liquidity."
He added that the company will continue to buy and sell bank stock shares, according to market conditions.
Anbang units, especially in the life segment, saw total premium income fall after the China Insurance Regulatory Commission curbed the sale of wealth management-type insurance products in the country.
Between Jan. 1 and June 30, the total premium income of Anbang Life and Hexie Health fell 16.1% to 191.62 billion yuan and 65.1% to 37.24 billion yuan, respectively, compared to the same period last year. The exception among Anbang's insurance stable was its property and casualty unit, Anbang Property Insurance Co. Ltd., whose premium income grew 50.4% to 3.3 billion yuan in the first half of 2017 against the same period in 2016.
"Anbang's [life insurance] premium income has declined significantly this year," Li Jian, an insurance research partner at Autonomous Research Asia Ltd., told S&P Global Market Intelligence.
"Anbang may need to prepare ample cash and adequate liquidity to deal with potential insurance policy surrender concerns," he said, adding that it is hard to establish a direct link between the bank share sales and the concerns.
The sale proceeds will improve Anbang Life's and Hexie Health's solvency ratios by contributing to their recognized asset bases, noted Dayton Wang, vice president of research department at Huatai Financial Holdings (Hong Kong) Ltd.
As of March 31, the comprehensive solvency ratios of Anbang Life and Hexie Health stood at 129.20% and 102.01% respectively, close to the regulatory requirement of 100%. The average comprehensive solvency ratio for life insurers in China was 230% as of March 31, according to regulatory data. Anbang P&C's comprehensive solvency ratio stood at 414.83%, compared to the average of 269% among Chinese P&C insurers.
Anbang's insurance units have not disclosed solvency ratio reports for the quarter ending June 30, which were due by end-July. The group's spokesman said it has received regulatory approval to delay such disclosures, and the documents will now be released at end-October along with the third quarter solvency ratio reports.
As of Aug. 31, US$1 was equivalent to 6.60 Chinese yuan.