(Yicai Global) Oct. 17 -- Stakes in Chinese insurance companies, especially smaller ones, are becoming more difficult to sell as an increasing number of minority shareholders put their equity on the market due to economic difficulties and as the insurance sector logs stalling growth.

There have been several judicial auctions of equity in China’s insurance sector in the past year, and most are minority stakes in small and medium-sized insurance firms, according to Yicai Global research. E-commerce giant Alibaba Group Holding’s judicial auction platform Ali Auction, for instance, has held 10 such auctions in the last 12 months.

But, although stakes in insurance firms were once highly prized, it is getting harder to find buyers. There were almost no bidders for minority stakes in Allianz JD Property & Casualty, Greatwall Life, Fosun Health, Asia-Pacific Property & Casualty Insurance and Ancheng Property & Casualty Insurance that were put up for auction last week, with one exception.

Only Allianz JD managed to sell 3.3 percent equity to parent firm Allianz Group at the full value price of CNY57.5 million (USD7.9 million) on Oct. 14, according to Ali Auction. This hiked the German insurance giant’s majority stake to 53.3 percent.

And many shareholders are having to repeatedly auction their equity at ever lower asking prices in order to effect a sale. Chongqing Three Gorges Fruits Group, for example, attempted to sell its 1.6 percent stake in Asia-Pacific Property & Casualty again last week for CNY53.7 million (USD7.5 million), 30 percent below its evaluated worth of CNY83.9 million (USD11.6 million).

While some stakeholders want out amid a cooling market, many are being forced to sell equity as a means of settling debt disputes, said Wang Pengbo, a senior financial analyst with Botong Analysys.

All of the above-mentioned auctions took place because minority shareholders encountered difficulties in their main businesses and their equity was either pledged or frozen, he added.

The insurance sector has been under pressure for some years, so it is normal for the once heated sales of stock to cool down, Li Zhiwei, co-founder and Snail Insurance Broker and fellow of the Society of Actuaries, told Yicai Global.

China has close to 200 insurance firms and they are all basically doing the same thing, causing intense competition, Li said. Uncertainties brought about by the Covid-19 pandemic are adding to the pressure and so some stakeholders will consider disposing of their equity.

It is also hard to sell a small stake because any potential new holders are not able to participate in the firm’s governance, Wang said. Stalling growth in the insurance sector and sluggish stock prices all mean that investors are less willing to invest, he added.

Mergers and acquisitions will continue to take place in the insurance sector, and differentiation will intensify in the mid- to long run as insurance firms seek to develop their own way, Li said. Digital technologies and emerging business patterns are the main way to boost market confidence, he added.

Editors: Tang Shihua, Kim Taylor