Chinese government takes over property developer’s insurance arm

China’s financial regulator has granted approval for the acquisition of China Evergrande Group’s insurance business by a newly established state-owned entity.

The National Administration of Financial Regulation in China made the announcement last week, stating its agreement to transfer the entire business, along with the related assets and liabilities, of Evergrande Life Insurance to Haigang Life Insurance. Haigang Life Insurance is a novel entity funded by five state-backed organizations.

Shenzhen City Penglian Investment, a government-supported entity, will hold a 51% stake in Haigang Life, while the China Insurance Security Fund, also state-backed, will possess 25%. The remaining share is owned by three other state-affiliated companies.

While neither party has provided a reason for the transfer, the report suggested it would be a crucial step in Evergrande’s asset liquidation efforts, given the property giant’s ongoing restructuring.

Evergrande Life was facing insolvency, according to relevant data. The 2021 annual report of its Hong Kong-listed parent, Evergrande Group, published in mid-August following significant delays, disclosed that the life insurance arm incurred losses exceeding CNY40 billion ($5.5 billion) in that year alone. This situation resulted in total liabilities surpassing total assets by nearly CNY19 billion by the end of 2021.

Specific details regarding the price and other aspects of transferring Evergrande Life’s business, assets, and liabilities to Haigang Life remain unclear. That said, the new insurer will be headquartered in the coastal city of Shenzhen instead of inland Chongqing.

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