98% Shares Pledged & Frozen: What's Happening to Asia-Pacific Insurance?

Here is the English translation of the provided text: **Fines** have been an inescapable keyword for **Asia-Pacific Property Insurance Co., Ltd.** (hereinafter referred to as "Asia-Pacific Property Insurance") recently.

Within the past month, the company has received multiple fines for various violations, totaling 1.111 million yuan.

The issues faced by Asia-Pacific Property Insurance go beyond this: the 98.32% equity held by its top four shareholders is currently frozen or pledged, and its performance is not optimistic.

In 2023, it turned from profit to loss again, with a loss amounting to 706 million yuan.

This series of numbers has sounded the alarm for the internal governance of Asia-Pacific Property Insurance.

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In just one month, Asia-Pacific Property Insurance has disclosed three consecutive times on its official website that it has accepted administrative penalties.

The largest fine came from the Shenzhen Regulatory Bureau of the China Banking and Insurance Regulatory Commission, pointing out that the company did not use the insurance company's funds as stipulated, and was fined 900,000 yuan; Yu Haibo, the then Vice President and Chief Investment Officer, and the financial officer of Asia-Pacific Property Insurance, was responsible for the violation and was warned and additionally fined 100,000 yuan personally.

Reporters learned that Yu Haibo has now been promoted to the President of Asia-Pacific Property Insurance.

His resume shows that he has rich experience in financial work, having served as the financial department manager, financial director of Shanxi Pan-sea Construction Investment Co., Ltd., the director of the capital financial management center of the asset financial department of Pan-sea Holdings Co., Ltd., the general manager of the asset financial department, and the general manager of the asset financial department of the real estate development group headquarters.

Yang Fan, the general manager of Beijing Paipai Network Insurance Agency Co., Ltd., told reporters that not using the insurance company's funds as stipulated will not only bring regulatory and reputation risks, but improper use of funds may also lead to company fund losses or even financial crises, and bear legal responsibilities for violating relevant laws and regulations.

Asia-Pacific Property Insurance responded that the company has a profound understanding of the seriousness of the problem and has taken actions to rectify, including six major measures such as improving systems and internal self-inspection, aiming to strengthen corporate governance and risk control management, ensuring that all business activities are compliant, and taking this regulatory penalty as an opportunity to continuously improve the level of corporate governance and ensure long-term stable development.

At the branch level, due to cross-provincial operation of insurance business, Asia-Pacific Property Insurance Zhejiang Branch was warned and fined 30,000 yuan; Yu Yang, the then general manager of Asia-Pacific Property Insurance Zhejiang Branch, was warned and fined 10,000 yuan.

Asia-Pacific Property Insurance Tianjin Branch was warned and fined 40,000 yuan for not registering and managing according to regulations, and for operating insurance business across provinces, autonomous regions, and municipalities directly under the Central Government; Shi Xiaorong, the then manager of the commercial insurance department of Asia-Pacific Property Insurance Tianjin Branch, and Fang Yulong, a personal insurance agent, were responsible for the above two violations, and were fined 10,000 yuan and 21,000 yuan respectively, totaling 71,000 yuan.

Speaking of internal corporate governance, Yang Fan believes that it is necessary to first strengthen compliance awareness to ensure that all business activities strictly comply with laws and regulations; secondly, to improve risk management capabilities and establish a sound risk prevention mechanism; thirdly, to optimize the governance structure to ensure the scientific and transparent decision-making; and fourthly, to strengthen staff training to improve the overall professional quality and professional ethics, to ensure the long-term stable development of the company.

A large proportion of equity has been pledged and frozen.

Public information shows that Asia-Pacific Property Insurance is headquartered in Shenzhen, formerly known as the Shenzhen branch of Hong Kong Min'an Insurance Co., Ltd., established in 1982, and was approved to be restructured into a national comprehensive property insurance company - Min'an Insurance (China) Co., Ltd. in 2005.

In 2011, with the approval of the original China Insurance Regulatory Commission, HNA Capital Holdings and several other companies jointly acquired 100% of the equity of Min'an Insurance (China) Co., Ltd., which was then renamed Min'an Property Insurance Co., Ltd. (hereinafter referred to as "Min'an Property Insurance").

In November 2015, Xinhualian Holdings and Pan-sea Holdings and other companies jointly acquired 100% of the equity of Min'an Property Insurance, becoming its new controlling shareholders.

In January of the following year, Min'an Property Insurance was officially renamed Asia-Pacific Property Insurance.

At present, Asia-Pacific Property Insurance has five shareholders.

Among them, the top four shareholders Wuhan Central Business District Co., Ltd. (hereinafter referred to as "Wuhan Central Business District"), China Minsheng Trust Co., Ltd. (not yet approved by the regulatory authorities), Yili Resources Group Co., Ltd., and Chongqing Three Gorges Fruit Industry Group Co., Ltd. hold 98.32% of the equity, which is all frozen or pledged.

It is worth noting that in May 2022, the original China Banking and Insurance Regulatory Commission published the fifth batch of major illegal and irregular shareholders list, and Wuhan Central Business District, the controlling shareholder of Asia-Pacific Property Insurance, was listed.

The "Regulations on the Supervision of the Behavior of Major Shareholders of Banking and Insurance Institutions (Trial)" clearly stipulates that when the number of shares pledged by major shareholders of banking and insurance institutions exceeds 50% of the shares they hold, major shareholders and the directors they nominate shall not exercise their voting rights at the shareholders' (large shareholders') meeting and the board of directors.

"Share pledge is a normal financing behavior of shareholders, and since Asia-Pacific Property Insurance is an independent legal entity, the shareholder situation does not have a direct impact on the company's operation and management."

The person in charge of Asia-Pacific Property Insurance said.

An industry insider told reporters that share pledge is one of the common financing methods for shareholders, which can obtain a large amount of liquid funds in a short period of time to alleviate the company's funding gap; share freezing is a judicial compulsory measure taken by judicial authorities during the process of preservation and execution according to the application of the creditor, which is caused by disputes between shareholders and others.

"These two generally do not have a direct impact on the operation and management of insurance companies.

However, if a large number of shares of an insurance company are pledged and frozen, it needs to be vigilant."

In the view of the above-mentioned industry insiders, on the one hand, it will convey the signal of poor company operation to the outside world, causing a public opinion crisis to a certain extent, and causing worry among consumers; on the other hand, once there is a problem with the shareholder's equity, resulting in the restriction of shareholder rights, it may have a certain impact on the operation and management of the insurance company.

Not yet achieving stable profitability.

Looking at the performance, Asia-Pacific Property Insurance has been on the edge of profit and loss in recent years, and the loss is greater than the profit.

Annual report data shows that after a loss of 447 million yuan in 2016, Asia-Pacific Property Insurance achieved profitability for four consecutive years from 2017 to 2020, with net profits of 14 million yuan, 34 million yuan, 43 million yuan, and 61 million yuan respectively.

Unfortunately, the good times did not last long, and in 2021, Asia-Pacific Property Insurance turned from profit to loss, with a net loss of 495 million yuan; in 2022, it slightly improved, making a profit of 52 million yuan; in 2023, it turned to loss again, with a loss amounting to a recent high of 706 million yuan.

In this regard, Asia-Pacific Property Insurance said that in recent years, the domestic economic situation has been sluggish, the capital market has fluctuated greatly, and investment returns have generally been under pressure, coupled with frequent typhoons and rainstorms, all of which have brought phased pressure to the company's operation.

"In addition, considering that some trading parties have liquidity pressure, the company has made impairment provisions for some investment projects that have not been paid on time based on the principle of prudence."

In the first half of this year, Asia-Pacific Property Insurance achieved insurance business income of 2.875 billion yuan, but the net profit was only 24 million yuan.

In terms of solvency, as of the end of the second quarter of this year, the core and comprehensive solvency adequacy ratios of Asia-Pacific Property Insurance were both 134.47%, and it is expected to decline to 127.50% by the end of next quarter.

In addition, according to the business information of the top five commercial insurance types with the original premium income in 2023, the top five types of Asia-Pacific Property Insurance are car insurance, liability insurance, health insurance, accidental injury insurance, and corporate property insurance.

However, last year, these five types were all in an underwriting loss state, with car insurance underwriting loss of 43 million yuan, second only to health insurance.

A general manager of the car insurance department of a small and medium-sized property insurance company pointed out to reporters that after the comprehensive reform of car insurance, the trend of industry scale and profit concentration towards the main body is becoming more and more obvious, and the space for survival and development of small and medium-sized insurance companies is further squeezed.

Therefore, for small and medium-sized insurance companies, it is necessary to abandon the extensive development, adhere to the "stable" word first, focus on the benefit center, and do a good job in car insurance operation with "professionalization, refinement, and intensive management" as the starting point.