China Life exits NYSE; US-listed Chinese insurance stocks struggling
~Monday, September 12, 2022 Blog Post~
China Life exits NYSE; US-listed Chinese insurance stocks struggling
Friday, September 9, 2022
- Author: Raymond Barrett
- Theme: Healthcare & Pharmaceuticals, Real Estate, Technology, Media & Telecom, BankingFintech, Insurance
Following China Life Insurance Co. Ltd.’s decision to depart the New York Stock Exchange amid an ongoing standoff between Beijing and Washington, the performance of some remaining U.S.-listed Chinese insurance players suggests investors would not mourn additional such departures.
China Life officially exited the NYSE on Sept. 2. Four other major state-owned entities in strategic sectors have similar plans for what seems to be the endgame in a yearslong battle where U.S. financial regulators demanded more access to the books of U.S.-listed Chinese companies.
The Biden administration has been somewhat less aggressive toward Chinese companies than its predecessor, which introduced the Holding Foreign Companies Accountable Act in December 2020. The two nations recently reached a compromise to allow Chinese firms remaining on U.S. exchanges to have their accounts audited in Hong Kong.
Equity prices crumbling
Chinese companies in the insurance space listed on major U.S. exchanges include Fanhua Inc., Huize Holding Ltd. and Tian Ruixiang Holdings Ltd. along with insurtech Waterdrop Inc., all of which have seen their stocks fall precipitously over the last year.
Waterdrop’s shares have followed a similar downward spiral as its U.S. insurtech peers. After an IPO in May 2021 at $12.00 per share, the Chinese insurtech’s stock closed at $1.20 on Sept. 9. In contrast, the S&P 500 Insurance index is up around 7% over the same period.
Tian Ruixiang has been on a rollercoaster ride since listing in the U.S. in January 2021, surging more than 1,000% on its debut before falling back to earth. Press reports at the time suggested sharing the same three letter-abbreviation TRX as the Tron cryptocurrency as one possible reason behind the surge. In June, Tian Ruixiang said Nasdaq had notified the company that it was “not in compliance with the minimum bid price requirement” of $1 per share.
Huize Holdings and Fanhua are both would-be disruptors hoping to use digital channels to connect insurers with clients, but Chinese tech stocks in particular have seen steep share price declines amid broader concerns about China’s economy, particularly the property market.
Other Chinese insurers are open to U.S. investors via the over-the-counter market, including Ping An Insurance (Group) Co. of China Ltd., Zhong An Group Ltd. and China Pacific Insurance (Group) Co. Ltd. But according to an August note from law firm White & Case, the HFCAA threatens to prohibit the trading of these securities in the U.S. via the OTC market “by 2024, if not earlier.”
For the week ending Sept. 9, Huize was up 11.24%, Fanuha lost 0.39%, and Tian Ruixiang rose 13.70%.
Insurance stocks as a whole performed a bit better than the broader market as the S&P 500 Insurance index increased 3.97% this week to 562.37, while the S&P 500 gained 3.65% to finish at 4,067.36.
Silver lining
But given the general decline in an array of Chinese stocks — the broader S&P China BMI is down around 40% since Waterdrop’s IPO — the future for the Chinese insurance market is perhaps not as gloomy as the figures for those listed in the U.S. might suggest.
Waterdrop executives during a Sept. 9 earnings conference call were bullish about the insurtech’s long-term prospects, saying that China’s aging population means the demand for insurance will increase in the years ahead.
China is still a vastly underinsured market compared to the U.S., which should provide runway for growth. A recent report by Munich Re noted that only about 2% of economic losses caused by natural catastrophes in the country are insured.
