Delays in Ping An’s trust repayment reflect state of firm’s asset management operations

Delays in Ping An’s trust repayment reflect state of firm’s asset management operations | Insurance Business Asia

Insurance News

Delays in Ping An’s trust repayment reflect state of firm’s asset management operations

The firm appears to still be affected by the downturn of China’s real estate market

Insurance News

By
Abigail Adriatico

The delays in insurance firm Ping An Insurance Co.’s trust repayment on an investment product linked to property seemingly showed how it had been affected by the continued downturn of the Chinese real estate market, according to a Bloomberg report.

Ping An Trust recently apologized to its customers because it had postponed the payment. It directed the blame towards the recent overall downturn seen in the real estate market as it is also planning to sue defaulted developer Zhenro Properties Group Ltd. The insurance firm was also looking for ways in order to regain the lost money of investors.

A report by Securities Times found that the product had raised about $107 million in 2021 as funding for a property project that was set to be built in Xiamen, which had matured in the previous month. The sales at the development have been reported slow and the proceeds from the project were found to be going into a regulatory account following Zhenro’s default.

Despite the delayed payment not being large, it still indicated that Ping An may be affected by the real estate market. The firm had recently lost billions due to an investment it made a few years ago to property developer China Fortune Land Development Co.

Last March, Michael Guo, co-chief executive officer at Ping An, assured Bloomberg that the risks the firm took were still controllable and that it had enough reserves to power through the downturn. Its annual report showed that its asset management business was able to set aside provisions as well as revalue some items even in the midst of rising credit risks and volatilities in the capital market.

Notably, trust companies were a vital source of funding for the country’s housing sector prior to the downturn seen in the market. Trusts have raised funds through selling products that were high yielding to wealthy individuals as well as companies, with some of the money being used for property projects.

With the current crisis in the real estate market, the trust industry’s large players have been dragged down as many firms have filed for bankruptcy, such as Zhongzhi Enterprise Group CO. and Sichuan Trust.