Chinese insurers increased their stock holdings by 19 percent in the first quarter of this year, helped by the strong rally in the country's capital markets since February, the industry regulator said yesterday.

Around 288.6 billion yuan, or 9 percent of the insurers' total investments, were in stocks and equities as of March 31, according to the China Insurance Regulatory Commission (CIRC).

"The proportion is one percentage point higher than the beginning of this year," said Yuan Li, spokesman of the CIRC.

Thanks to a 30 percent gain in the benchmark Shanghai Composite Index, insurers' average investment return stood at 1.4 percent in the first three months.

Among the investment portfolio, bank deposits increased by 4.6 percentage points to 31.3 percent, while bond holdings dropped 5.1 percentage points to 52.8 percent. Mutual funds accounted for 5 percent, down 0.4 percentage points.

The stock market rally also helped bolster earnings at insurers. Chinese insurance companies posted a combined profit of 8.58 billion yuan in the first quarter, up 79 percent from a year earlier, Yuan said.

Life insurers had a combined 7.9 billion yuan profit in the first quarter, up 21 million yuan over the same period last year. Property insurers posted 27 million yuan in profit, reversing the loss of a year earlier, Yuan said.

The regulator is still striving to open more investment channels to boost insurers' investment returns.

"As the revised insurance law has allowed insurers to invest in real estate, we are now working on detailed regulations to specify how much could they invest in this sector and other supporting rules," said Yuan.

However, insurers are not allowed to get directly involved in estate development and property speculation, he added.

"Insurers' property investment is mainly to get rent income," said Yuan, adding it would be mainly focused on buildings for their own use, affordable housing and retail property.

Hao Yansu, insurance professor from the Central University of Finance and Economics, said as insurance companies' capital seeks long-term returns, quality office buildings and commercial properties are perfect choices for them.

In fact, a number of insurance companies have made some attempts in property investment through various means.

(China Daily April 30, 2009)