Goldman Sachs acquires 12% of Taikang

BEIJING - China's insurance regulator has approved Goldman Sachs Group's purchase of a 12.02 percent stake, or 102 million shares, in Taikang Life Insurance Co Ltd, the insurance company said in a statement on Friday.

"The two companies will strengthen cooperation in corporate governance, risk management, investment management and product development," the statement said.

The transaction will make Goldman Sachs the second-largest stakeholder of Taikang, China's fourth-largest life insurer. The financial details of the deal, however, were not disclosed. Industry insiders said that Goldman Sachs' costs might be as high as 60 yuan ($9.2) for each share.

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French insurer AXA SA said last month it agreed to sell its 15.6 percent stake in Taikang to a group of investors for $1.2 billion. The other two stakeholders are China Guardian Auction Co Ltd and Tetrad Ventures Pte Ltd.

Income from premiums for Taikang Life Insurance hit 86.77 billion yuan last year, up 29 percent year-on-year. The insurer's net profit is expected to reach 2.1 billion yuan, with the solvency ratio exceeding 170 percent.

It is not Goldman Sachs' first investment in China's insurance sector. In 1994, the investment bank, together with Morgan Stanley Group, bought a combined 9.91 percent stake in Ping An of China at a cost of $35 million.

Analysts said the move will pave the way for Taikang's imminent listing. Taikang and New China Life Insurance Co have both been working toward a listing this year.

Sources said earlier that China International Capital Corporation and Nomura Securities Co have agreed to buy a 2.5 percent stake each in New China Life Insurance from Zurich Financial.

Given the huge potential of China's insurance sector, an increasing number of foreign institutional investors have jumped on the bandwagon.

Guangzhou-based CNinsure Inc, a Nasdaq-listed insurance intermediary company, recently sold its 55 percent stake in Beijing Fanhua Datong Investment Management Co Ltd to Winner Sight Global Limited, an affiliated entity of Warburg Pincus LLC. According to the China Insurance Regulatory Commission (CIRC), the country's income from premiums accounted for just 3.4 percent of gross domestic product in 2009, far less than the global average of 7 percent. China's per capita premium was $121, compared with the global average of $595.

Wu Dingfu, CIRC chairman, said earlier that Chinese insurers are expected to report a 25.1 percent increase in profits to 57.6 billion yuan in 2010.