Ping An

The market value of Ping An, located in the southern Chinese city of Shenzhen, stands at $96 billion, 60 percent higher than that of Fortis. The rally on China's stock market, the world's best performing, turned Beijing-based PetroChina Co. into the world's biggest company by market value, and made Industrial & Commercial Bank of China Ltd. the largest bank.

Ping An, in which HSBC Holdings Plc holds a 17 percent stake, climbed 7 percent to HK$83.55 in Hong Kong, and added 6.3 percent to 108.80 yuan in Shanghai.

Fortis, in a statement to Hugin wire, said Ping An's investment ``allows it to gain access to high-growth markets, in particular China.''

Ping An bought 95.01 million Fortis shares on the Euronext Brussels and Euronext Amsterdam as of Nov. 27, it said in a release to the Hong Kong stock exchange.

``The deal will realize valuable benefits because of Fortis's and Ping An's shared business model of an integrated banking and insurance platform,'' said Ping An Chairman Peter Ma in the statement. ``Ping An will benefit from Fortis's expertise in cross selling, risk management and innovation in product design.''

Looking Abroad

Fortis's third-quarter earnings from banking stood at 587 million euros, while profit from insurance was 294 million euros.

Ping An is seeking to diversify by assembling a one-stop financial supermarket that will get two-thirds of its revenue from banking, securities and asset management.

In March, Ping An and larger rival China Life Insurance Co. paid a combined 10.8 billion yuan ($1.4 billion) for about 10 percent of China Minsheng Banking Corp., the nation's only privately controlled bank. Ping An bought 89 percent of Shenzhen Commercial Bank last year, and HSBC, Europe's biggest lender, said in February that Ping An was buying its 27 percent stake in Ping An Bank.

China will remain the key focus for Ping An's investments even as it seeks acquisitions abroad, Cheung said June 1.

``Chinese companies have the money to invest, but they cannot be seen to play an influential role in acquisitions,'' said Mark Tan, a portfolio manager at UOB Asset Management in Singapore, which owns shares of Ping An and China Life. Ping An ``kept the purchase to below 5 percent as they're sensitive to the political ramifications of taking too large a stake.''

Spreading Risks

ICBC, which paid $5.6 billion for 20 percent of Johannesburg-based Standard Bank, and Citic Securities, which injected $1 billion into Bear Stearns, promised access to the world's fastest growing economy as part of their investments.

Insurance premiums in China increased 24 percent in the first nine months from a year earlier, driven by an economy that expanded 11.5 percent, according to data from the industry regulator.

China's insurance regulator has urged firms to spread risk on their more than $300 billion of assets. In July, the government allowed them to invest 15 percent of assets in overseas stocks and bonds, up from 5 percent.

Ping An said the Fortis acquisition was part of a strategy of ``applying its insurance funds and matching its assets to its liabilities.''

Citigroup Infusion

Ping An quadrupled third-quarter profit to 3.6 billion yuan, powered by gains on investments in China's stocks. The company oversaw $45 billion of investments as of June 30.

China Life, based in Beijing, is also on the prowl to diversity. The world's largest insurer by market value is ``very interested'' in buying foreign banks, Board Secretary Liu Ting said yesterday.

``Overseas banks are looking very attractive after the subprime crisis brought their share prices down,'' said Liu at a briefing in Beijing. ``This provides great opportunities for China Life and is a very worthwhile option for us to consider.''

Citigroup Inc., the largest U.S. bank by assets, has tumbled 42 percent in New York amid mounting credit market losses, leading to the departure of Chief Executive Officer Charles Prince.

Citigroup, which until July was the world's biggest bank by market value, this week said it's receiving a $7.5 billion cash infusion from Abu Dhabi to shore up its capital.

Fortis reported an unexpected decline in third-quarter profit on Nov. 8 because of an increase in borrowing costs and U.K. flood-insurance claims, sending the shares to the biggest decline in four years. They closed at 18.15 euros last week, giving Fortis a market value of 40 billion euros.

Merrill Lynch & Co. advised Fortis on the deal, while JPMorgan Chase & Co. advised Ping An.  

20 insurers win nod to invest in HK via QDII


CHINA has allowed 20 insurers to invest overseas, mainly in the Hong Kong stock market, under the qualified domestic institutional investors scheme, the top insurance regulator said yesterday.

The watchdog is also considering doubling the coverage of compulsory vehicle insurance to 120,000 yuan (US$16,238) from the current 60,000 yuan limit, Xinhua news agency said yesterday. The regulator said yesterday it will hold a hearing to solicit public views on the issue.

Insurers, including Ping An,

China Life, Taikang, Sino Life and American International Assurance, have won the go-ahead to invest in the Hong Kong market, Yuan Li, spokesman of the China Insurance Regulatory Commission, said yesterday at its third-quarter press briefing. Another three insurers have applied for permission.

The investments are mainly limited to H-shares and red chips. H-shares are the shares of Chinese mainland companies, and red chips are shares of overseas-incorporated companies whose main business is derived from the Chinese mainland.

An unnamed industry insider said some insurers are keen on the program as there is an open opportunity to make profits ahead of the Hong Kong shares "through train" program, which has not yet taken effect.

China said in August that it will allow mainland private investors to directly trade Hong Kong shares via mainland bank accounts.

This is expected to act as a shot in the arm for the Hong Kong market, and has also driven insurers' enthusiasm for the QDII program, the unnamed insider said.

China introduced the QDII program last year to channel part of its mounting foreign exchange reserves and ease the flush of cash in the mainland stock market.

China's foreign currency reserves topped US$1.46 trillion in October.

Ping An, China's second-largest insurer by market value after Beijing-based China Life, depends on investment gains from stocks and bonds for about 30 percent of revenue. If stock prices fall further, the company's market capitalization will decline, said Tony Zheng, who holds 8.1 million Ping An shares among the $3 billion he helps oversee at Bank of Communications Schroder Fund Management Co. in Shanghai.

``There's zero chance Chinese insurers can keep up their stellar investment returns,'' Zheng said. ``Ping An will weather a shakeout better than China Life, however, since it's more aggressively diversified,'' having purchased stakes in companies including Belgian financial-services company Fortis, he said.

China Life has climbed 68 percent in Hong Kong trading to HK$44.65 this year, while Ping An more than doubled to HK$91.30.

Ping An, partly owned by London-based HSBC Holdings Plc, said Nov. 29 that it bought 4.2 percent of Fortis for 1.81 billion euros ($2.6 billion) in the largest overseas purchase by a Chinese insurance company. China Life also is ``very interested'' in buying foreign banks, Board Secretary Liu Ting said Nov. 28 at a press briefing in Nanjing.

Hedge Funds

Ping An Chairman Peter Ma wants two-thirds of revenue to come from providing banking, securities and asset management services. The company also will increase investments outside China to reduce its dependence on Asia's most expensive stock market. The average stock in the CSI 300 trades at 37.4 times estimated 2007 earnings, compared with 20.6 for Hong Kong stocks.

Ping An was the first Chinese insurer to receive approval to use local-currency assets to invest overseas, giving it potentially $3.4 billion to spend on foreign stocks.

The company spent HK$1.1 billion ($141.1 million) last month for 9 percent of Hong Kong-based Value Partners Group Ltd., ranked by Alpha magazine as Asia's second-biggest hedge fund by assets under management. Ping An plans to offer investment products with Value Partners to tap China's $2.3 trillion of household savings.

Ping An's life insurance premiums increased 15.4 percent during the first 10 months of this year, trailing the industry wide average of 20.3 percent, data compiled by the China Insurance Regulatory Commission show. China Life and Ping An claimed 41.8 percent and 16 percent of the nation's life insurance market, respectively, in the latest period, down from 47.4 percent and 16.7 percent a year earlier.

AIG in China

Foreign rivals led by AIG are striving to gain ground in China to help make up for losses linked to the longest U.S. housing slump in 16 years. Third-quarter profit at AIG, which has units that originate, insure and invest in home loans, dropped 27 percent on losses related to subprime mortgages. AIG shares have declined 19 percent this year, the third most on the Dow Jones Industrial Average.

Policy sales at AIG's U.S. commercial insurance unit, the company's largest, declined 1 percent in the third quarter to $6 billion. The U.S. insurance market is close to saturation with 77 percent of Americans owning some type of life insurance in 2004, data compiled by the American Council of Life Insurers show. Only 4 percent of China's 1.3 billion people have insurance, KPMG International reported.

Life insurance premiums at AIG's China unit increased 29.5 percent this year. AIG, founded in Shanghai in 1919 and the only foreign insurer with a wholly owned operation in China, holds 16 percent of property and casualty insurer PICC Property & Casualty Co.

`Proxy Play'

Ping An's profit from banking rose 10-fold in the first half to account for 13 percent of net income. The company bought 89 percent of Shenzhen Commercial Bank last year and, along with China Life, Ping An paid 10.8 billion yuan ($1.5 billion) in March for about 10 percent of China Minsheng Banking Corp., the country's only privately controlled bank.

The company's brokerage unit contributed about 8 percent to profit in the first half of this year.

``Insurance stocks remain a great proxy play for China's galloping GDP growth,'' said Fan Dizhao, who helps oversee about $1.8 billion at Guotai Asset Management Co. in Shanghai, which owns 5.5 million China Life shares and 3.8 million Ping An shares. ``Demand for insurance is growing steadily.''  

The snowfall in January, the heaviest in more than 50 years, has triggered the growth potential of property and casualty insurance, which are expected to record maintain momentum this year.

China's stock-market decline may cut into investment returns for domestic insurers. The benchmark Shanghai Composite Index has so far slid 27 percent this year.

Ping An Insurance (Group) Co can expect to see a slower investment growth this year as a fallout from the stock-market performance, said Luo Yi, a China Merchants Securities Co analyst.

The country's second-biggest insurer said investment returns soared 168 percent to 57 billion yuan in 2007, 48.6 billion yuan of which were from stock and fund investment returns.