Insurer likely to gain around $500m from the sale of holding

BEIJING - China International Capital Corporation and Nomura Securities Co have agreed to buy a 2.5 percent stake each in New China Life Insurance Co (NCI) from Zurich Financial, industry sources said.

Zurich Financial Services Group, Switzerland's biggest insurer by market capitalization, will get 28 yuan ($4.25) a share, Caing.com cited unnamed sources as saying.

Zurich Financial said on Monday that it sold a quarter of its stake in NCI to an undisclosed buyer, lowering its share to 15 percent. The insurer will gain about $500 million from the proceeds, a spokeswoman said, valuing the remainder of the stake at about $1.5 billion.

The sale, which is subject to regulatory approval, is expected to be closed in the second quarter of this year, Zurich said.

"Our decision to sell 5 percentage points of our stake in NCI reflects a desire to manage our financial exposure to a business we do not control while retaining our belief that China's fast-growing insurance sector represents a highly attractive investment opportunity for Zurich," said Zurich's CEO, Martin Senn, in a statement.

He added that Zurich Financial will also continue to focus on building its own insurance business in this important market.

Related readings:  China 2010 insurance premiums likely up 33% y-o-y  Zurich Financial buys $420m of Chinese insurer  Nomura to open data-entry center in China  Nomura Holdings tops Institutional Investor's China equity research poll

Zurich Financial, which started investing in NCI in 2000, said in October it would buy up to $420 million in NCI shares to keep its stake at about 20 percent after a rights offer. NCI controlled about 9 percent of the Chinese life insurance market as of December,

A senior corporate executive from Zurich Financial's top management told China Daily earlier this year that the company is seeking merger and acquisition opportunities in China, especially in the life insurance sector.

In that case, the sale of NCI shares may aim to serve Zurich Financial's overall strategic operations in China, insiders said.

Liu Yigong, vice-president at NCI, said in November that the company is going to list on both the Shanghai and Hong Kong exchanges. According to Caing.com, it plans to go public in the third quarter of this year.

Aside from NCI, China's fourth-largest life insurer Taikang Life Insurance has also been striving for a listing.

According to an analyst at a leading security company, who spoke on condition of anonymity, the price of NCI shares would be lower than that of Taikang Life Insurance because of NCI's higher cost for individual life insurance premiums and flat investment performance.

According to the Beijing insurance regulatory bureau, Zurich was the first foreign insurer to establish a general insurance branch in Beijing, in 2006, and also achieved the highest revenue in the capital's property insurance market among foreign companies. Its market share in Beijing increased to 0.93 percent last year from 0.7 percent in 2009.