Construction Bank Likely to Have an Insurance License

China's largest property lender China Construction Bank 601939.SH, 0939.HK) is guessed to take over the 50% stake that China Pacific Insurance (Group) Co. (CPIC, 601601.SH, 2601.HK) holds in Pacific-Antai Life Insurance.

Pursuant to the announcement of the financial center Shanghai-based CPIC, the 50% stake of Pacific-Antai Life Insurance will be sold at CNY 943 million. With registered capital of CNY 800 million, the joint venture insurer over 2008 and 2009 reaped the net profits of CNY 142 million and CNY 77.1 million respectively. Actually, ING as the foreign parent of Pacific-Antai Life Insurance had intended to sell another 50% stake that it takes in the company at last yearend.

This time, Beijing-based Construction Bank might lead an investment consortium to bid for the stake of Pacific-Antai Life Insurance transferred by CPIC. As required by the nation's insurance industry regulator China Insurance Regulatory Commission (CIRC), an institution shall not be the controller of two insurance firms engaged in the same trade. Actually, CPIC had the intention to sell the stake of Pacific-Antai Life for a long time.

Established in 1998, Pacific-Antai Life from this January to September, the Sino-foreign life insurer earned the premium revenues of CNY 750 million, thus ranking as No.39 among all life insurance companies in the country. During the first nine months of this year, it realized CNY 41.6 million in the operating profits.

By now, three of China's large state commercial banks have become the shareholders of the insurance companies via making investment. Among them, Industrial and Commercial Bank of China takes a controlling 60% right in AXA-Minmetals Assurance Co.; Bank of China is the controlling shareholder of BOC Insurance and Heng An Standard Life; and Bank of Communications controls a 62.75% stake in BoComm Life Insurance Limited.

In order to boost the insurance business, commercial banks are expected to pay close attention to such business on the one hand; and one the other hand, they shall establish an appropriate mechanism to ensure the interest of staff in both the banking and insurance outlets.

Still, some industry experts are worried that some insurance companies without the support of banks might have difficulty in doing the bancassurance business. However, banks will not rule out the possibility to sell the products of more than one insurers in order to gain more commissions.