Private equity in China’s insurance sector

It probably all started in 1994, when Goldman's Principal Investment Area and Morgan Stanley Private Equity took a combined 10.1% stake in Ping An Insurance for $35 million apiece. In April 2005, the private equity owners sold their stake to HSBC for HK$8.1 billion ($1 billion), at a 9% premium to its then-trading price. Ping An is now touted as China's second-largest insurance company, after China Life.

A recent success is the Carlyle Group's exit of its China Pacific investment, which is likely to be a catalyst for private equity investors with holdings in the insurance business. The Carlyle Group made several times their money on their 2005 investment.

The latest is that New China Life, which counts many financial investors amongst its shareholders, is eyeing a public debut, targeting an up-to $4 billion raise via a duel listing on the Shanghai and Hong Kong exchanges by the end of the year. A source close to the deal confirmed to AVCJ that New China Life filed its listing application with the CIRC, and the company will likely offer 15-20% of its stake on a post-IPO basis.

Currently the life insurer, touted as China's third-largest by gross premiums, is approximately 40%-backed by Central Huijin Investment Ltd., a division of China Investment Corporation with Baosteel Group Corp., the second-largest steel producer in the world, holding a 20% stake. An affiliate of Hony Capital holds 9%, while Singapore SWF, Temasek Holdings holds 3.5%, while Standard Chartered Private Equity has a 1.5% stake. A consortium involving Nomura and CICC took at 5% stake from Zurich in March - both firms will be involved in the IPO, which will be managed by UBS.

Of course, this news comes weeks after Goldman Sachs announced a return to the China insurance market with the acquisition of a 12.02% minority stake Taikang Life Insurance. Goldmans PIA bought the stake from French insurance giant AXA for an estimated $925 million, beating several private equity firms also interested in the stake. Industry analysts also predict that Taikang Life may launch its IPO as early as this year, which may garner a parallel $4 billion.

This is hardly surprising given that, according to the China Insurance Yearbook, the average annual growth of gross premiums issued by insurers in China grew at an average rate of 23.5% between 2000 and 2007. And with only 2.85% of China's population insured in 2007, another report further notes that life insurance penetration in China is poised to increase at a CAGR of 6.2% between 2009 and 2015.

Those are great numbers that will assure a successful IPO.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Financing
• Goldman Sachs
• Morgan Stanley Private Equity Asia
• The Carlyle Group
• Hony Capital
• Temasek Holdings
• Standard Chartered Private Equity
• Nomura Principal Finance