Foreign Parent to Reduce Stake in New China Life

Zurich Financial Services, the foreign shareholder of Beijing-based New China Life Insurance Co., just announced that it would sell a 5% stake of the life insurer to a selected buyer.

After this, Zurich Financial Services' shareholding proportion in New China Life will dilute to 15% from current 20%. In October 2010, however, the foreign financial group had agreed to subscribe for additional shares of the Chinese insurer so that it would remain as the second biggest shareholder of the insurance company.

This time, the equity transfer deal is expected to close during the second quarter of this year. By last yearend, the 20% stake that Zurich Financial Services held in New China Life was valued at USD 1 billion; and the foreign parent is likely to cash in USD 250 million after the sales of a 5% stake in the insurer.

Zurich Financial Services explained that it wants to control the financial risk via the move. Still, such an explanation seems to be inconvincible, as market analysts pointed out that the foreign shareholder could get fatter returns if it waits until the listing of New China Life.

Based in Beijing, New China Life is expected to get listed in Hong Kong and China's Mainland during the second half of this year. The Board Chairman said that the company has to further raise the solvency as required by China Insurance Regulatory Commission (CIRC). It earlier set up a special department in charge of the listing preparation work.

During the first nine months of 2010, New China Life was the country's third largest life insurer. In the January-to-September period, New China Life gained the premium revenues of more than CNY 75 billion, up 53% year on year; and the figure is expected to be CNY 100 billion in the whole year of 2010. By the end of 2009, the total assets of New China Life stood at CNY 206.6 billion, including the net assets of CNY 4.2 billion; and that year's operating revenues were CNY 73.7 billion and the net profits were CNY 2.65 billion.

Months ago, China SAFE Investments Limited, the largest shareholder of New China Life, is guessed to inject about CNY 4 billion into the company. Currently, SAFE Investments takes a 38.815% stake of New China Life; and state-owned Baosteel Group Corporation takes an 18.775% stake as the third biggest shareholder of the insurer. After the equity transfer of Zurich Financial, the steel-maker is to be the second largest shareholder of New China Life.