Prudential Said to Cut Holding in China JV

Prudential plc is said to be weighing a plan to sell part of a 50 percent stake it holds in CITIC-Prudential Life Insurance Co., Ltd.

Hurt by the global financial crisis, the UK-based financial services provider suffered net loss in 2008. Therefore, it made a decision not to focus on life insurance. It has sold life insurance operation in Taiwan to a local life insurer and is busy seeking buyers for such operation in Mainland China, now.

CITIC-Prudential Life was jointly established by Prudential and CITIC Group in October 2000 with a registered capital of CNY 1.98 billion. Headquartered in Guangzhou, it had about 18,000 employees servicing in branches and outlets in 30 Chinese provinces and cities as at the end of 2008. However, it has not started profit-making operation till now. In 2007, it reported a net loss of CNY 247.75 million and the figure was estimated at about CNY 200 million in 2008.

The situation is expected to be changed soon judging from its momentum last year. Statistics show that its premium revenue enjoyed an annual growth of 63 percent in the past eight years, always heading Sino-foreign life insurers across the country. The total number of its consumers nationwide has exceeded 470,000.

It is not a bad idea for Prudential to sell part of the stake it owns in the venture, said industry experts. On the one hand, it could fuel itself with cash gained from the sale. And on the other hand, it will benefit from the remaining stake. The prospect of the venture will be shining, as it will become a Chinese one after the deal. CITIC Group, a Chinese conglomerate, is likely to attach more importance to the venture in the future. In the case, the venture will, undoubtedly, grow fast.

Sources said in May this year that the venture planned to be listed on the domestic stock market in 2012. In order to achieve the goal, it will take moves including adjusting product structure, raising performance index, reducing expenditures, and conducting financial reinsurance in proper time. It has raised the annual premium revenue its ten province-level branches gain from new policies this year to CNY 1.3 billion, up 30 percent compared to CNY 1 billion in 2008, revealed insiders.

(USD 1 = CNY 6.83)