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China Life eyes PE, RE and infrastructure expansion

The Beijing-based insurance giant announced it would introduce plans to expand its investment horizon into alternative assets in October.

China Life Insurance Company, the New York and Hong Kong-listed insurance and annuity products provider, is to diversify its investments into alternative assets including real estate, private equity and infrastructure.

Traditionally, the Beijing-based group has invested in fixed-income securities, such as bank deposits and treasury, corporate and subordinated bonds. However in October, China Life will reveal details on how it will increase its investment activities into other sectors.

Despite the plans, Yang Zheng, general manager in charge of finance, said in a group announcement that China Life would not deviate from its traditional investments during the second half of this year.

Under Chinese regulations, insurance companies are unable to invest in riskier alternative assets.

However the China Insurance Regulatory Commission is expected to open the gates to enable insurance companies to invest substantially in such sectors. China Life chairman Yang Chao was reported by the China Daily as saying: “China Life will seek investment opportunities in infrastructure, equity, fixed-income securities and the property market.”

On real estate, he said: “We expect the guidelines to come out soon. China Life will hire talent familiar with the real estate sector and we are doing the preparatory work in this regard.”

The report by the China Daily also cited analysts who predicted that China Life would prioritize investments in commercial property rather than residential. Donghai Securities analysts Tao Zheng’ao told the paper: “To alleviate the pressure on profitability, the insurers need to find long-term investment opportunities to get stable returns. The insurers' investments in the property market would most likely be in the commercial market rather than residential housing market.”

Another analyst, Orient Securities’ Wang Xiaogang, was reported as saying that he thought the Chinese government would cap insurance companies’ exposure to alternative asset classes to five percent of total investments as the sector makes its first inroads into riskier investments.

China Life currently has a market capitalisation of $111 billion (HK$ 860 billion), according to Bloomberg.