6 Investors Bid for 15.6% of Taikang Life

Six investors took part in the first-round bidding French insurer AXA SA held for a 15.6 percent stake in Chinese insurer Taikang Life Insurance Co., Ltd. last Friday, said sources.

They are Temasek Holdings, Blackstone Group, Bain Capital, KKR, Hopu Fund and Hony Capital. The stake is priced at USD 1.05 billion, representing a 27 times P/E ratio. The deal is luring, as the Chinese insurer plans to be listed within two years, said industry observers. Any one who acquires the stake is expected to make a killing from the investment provided that the insurer gets listed one day.

Take Carlyle Group as an example. China Pacific Insurance (Group) Co., Ltd. (CPIC and SHSE: 610601), the nation's third-biggest life insurer, in September gained regulatory approval to raise at least CNY 23.52 billion via issuing not more than one billion shares at not lower than CNY 23.52 apiece in an IPO on the Stock Exchange of Hong Kong. Carlyle Group, a foreign shareholder of the insurer, is predicted to earn at least about CNY 24.7 billion if it sells stake in the latter at the price.

Taikang Life is the fourth biggest life insurer in China and its total assets reaches about USD 28.12 billion. The premium revenue and after-tax profit it captured last year hit CNY 57.7 billion and CNY 1.7 billion, respectively, with market share of 7.9 percent.

AXA established a 51-49 life insurance joint venture namely AXA-Minmetals Assurance Co., Ltd. with China-based Minmetals Corp. in Shanghai in June 1999. In 2006, it acquired Winterthur Insurance for USD 10 billion, and via the deal, it obtained a 15.6 percent stake in Taikang Life. In order to show a greater presence in the Chinese market, it had planned to control Taikang Life and then merge it with AXA-Minmetals Assurance, said an insider. However, the plan was laid on the table, finally. One possible reason is that it failed to reach an agreement with the target on price and another is that shareholders of the target had no intention to quit.

And the main reason for it to quit Taikang Life should be closely related to rules by the China Insurance Regulatory Commission, reiterated the insider. The top Chinese insurance watchdog unveiled proposals on the management of insurer' equity in September this year and according to concerned items, no peer competition is allowed provided that two or more insurers are controlled by the same company or one insurer is controlled by another.

(USD 1 = CNY 6.83)