Foresea Life Insurance Co, a unit of private conglomerate Baoneng Group, said on Tuesday it will "consolidate" its universal life insurance business to meet regulatory requirements by the end of this month.
The move comes in response to the suspension by the regulator of sales of its controversial products.
The Shenzhen-based insurer responded thus after the financial regulators stepped up efforts to rein in risks associated with the surge in stake-buying of listed companies' shares by insurance funds.
The buyouts have largely been funded by capital through sales of universal life insurance, a type of flexible insurance policy that offers life protection in addition to investment returns.
The insurer said it has a relatively strong ability to manage liquidity risks, according to media reports that cited an unnamed source at the insurer.
Foresea Life, controlled by tycoon Yao Zhenhua, gained prominence in its high-profile stake purchase of estate developer China Vanke Co Ltd, which resulted in a power struggle with Vanke's existing management.
The insurer has also been building up its stakes in some blue-chips, including Gree Electric Appliances Inc and medicine firm Dong-E-E-Jiao Co Ltd.
These purchases by Foresea Life have caught the regulator's attention, sparking fears that they will fan speculation in the market and threaten the management of public companies.
The China Insurance Regulatory Commission on Monday suspended Foresea Life's sales of universal life insurance products. The regulator also suspended online sales of insurance products by six major insurers, including Foresea Life and Evergrande Life Insurance Co.
The CIRC sent inspection teams to Foresea Life and Evergrande Life, according to a 21st Century Business Herald report.
Li Lifeng, an analyst with Sinolink Securities Co Ltd, said that the regulator's tough stance reflects its desire to curb speculation.
"The regulator has adopted a tougher stance toward the speculative trading by insurers. We expect that purchases of stakes in listed companies by insurance firms in the public market will slow down," Li said.
