Baosteel Group Corp will buy 90.1 million shares in New China
Life Insurance Co, taking its stake in the insurer to 17.3 percent,
the regulator said yesterday.
The share transfer from Shenhua Group Co will add to Baosteel's
existing 9.7 percent stake to make it the third largest
shareholder.
"Shenhua Group Co will transfer the shares to Baosteel, after
which Shenhua will no longer hold a stake in the insurance
company," the China Insurance Regulatory Commission (CIRC) said
yesterday.
As the largest steel firm in the country, Baosteel has shown
growing interest in the insurance sector. The company's wholly
owned subsidiary Huabao Investment is the largest shareholder in
China Pacific Insurance Co, with a 21.43 percent stake.
Baosteel has also invested 50 million yuan in Huatai Property
and Casualty Co. According to sources the steelmaker also plans to
set up a joint venture with Dai-ichi Mutual Life Insurance Co,
Japan's second largest life insurer.
"As Baosteel has a healthy cash flow, it is natural for the
company to seek investment opportunities. With huge growth
potential, insurance companies are a good choice," said Wang
Xiaogang, an analyst with Orient Securities.
Wang said Baosteel's investments in New China Life, China
Pacific and Huatai should be financial, but its initiative to set
up a joint venture life insurer shows it also intends to expand its
core business in the sector.
Experts said the new joint venture's advantage rests with
Baosteel's huge resources for group insurance.
Baosteel's large customer base will give the joint venture
considerable premium income in the short term. For Dai-ichi Mutual
Life Insurance Co, the large number of Japanese firms in the
Yangtze River Delta also provides vast opportunities.
As the regulator encourages State-owned firms to participate in
the insurance industry, Baosteel's application for the new joint
venture is more likely to get approval, said Hao Yansu, a professor
at the Central University of Finance and Economics.
Baosteel's shares closed at 16.91 yuan yesterday, down 0.35
percent.
According to Wang Xiaogang, China's insurance industry will see
another round of expansion in the next three to five years. But the
new players this time will mainly be State-owned companies and
financial institutions rather than private investors.
The Industrial and Commercial Bank of China has reportedly
contacted AXA and Allianz about setting up a joint venture life
insurer. Meanwhile, China Construction Bank has approached Ping An
Insurance Group, and Bank of Communications has applied to the CIRC
to set up an insurance company.
(China Daily December 25, 2007)
