One year on from China’s stock market collapse, some casualties are still feeling the pain. Shares in Chinese insurer Ping An have halved from their 2015 highs and trade just one-tenth above pre-rally levels. China Life languishes near 2008 lows. Much of the destruction has been due to an ill-timed increase in equity exposure that is unlikely to repeat itself — at least, not this year.
The rise in China’s stock markets came just as the insurers won increased investment freedom. In early 2014, the insurance regulator (CIRC) lifted limits on equity investment from 20 to 30 per cent of assets, including private equity in the basket. As the market rallied, Ping An and China Life raised their equity holdings. After a stellar first half, the second-half market tumble dragged down 2015 results.
The effects have lingered. In the latest quarter, China Life’s net profits more than halved as investment income fell. Ping An fared slightly better, but Bernstein notes that net profit — which eked out a small gain — was flattered by a lower tax rate; pre-tax profit from insurance fell by around a quarter.