China Life Insurance, the world's biggest life insurer by market value, is considering becoming the pre-IPO investor of Agricultural Bank of China (ABC) and the Asian unit of American International Group (AIG), the company's top management said yesterday.
"We're definitely interested in any influential, branded financial institutions with sound results, and such equity investment is in line with our strategy to maintain strong core business while developing diversified financial units properly," China Life Chairman Yang Chao told a media briefing in Beijing.
China Life has enjoyed close cooperation with ABC and has recently renewed a strategic cooperation deal for broader partnership. The company has also talked to underwriters for AIG's Asian life insurance unit, AIA, which is looking to list via an initial public offering in Hong Kong, Yang said.
AIG has chosen Deutsche Bank and Morgan Stanley as its joint global coordinators for an IPO for AIA worth more than $4 billion.
"The final decision on whether to invest in ABC and AIA depends on the pricing and other terms," Yang said.
For Wang Xiaogang, an insurance analyst with Shanghai-based Orient Securities, China Life's equity investment in these two companies is primarily for financial returns.
"China Life is not likely to be the largest single shareholder of ABC since the bank's benefit from the equity deal would be limited," said Wang.
As the largest lender to China's 800 million farmers, ABC is in talks with strategic investors as it steps up preparations for a dual listing in Hong Kong and Shanghai as early as the end of this year.
China Life's equity investment in the bank will give the insurer guaranteed access to ABC's more than 24,000 branches across China. China Life's 50 percent premium growth last year was driven by sales at the bank, one of the insurer's three-biggest partners.
"Such an equity investment will help strengthen the ties with ABC, which has a broad network in rural China," said an analyst with Shenyin & Wanguo Securities who declined to be named. He added that China Life's rural businesses, which are mostly higher-margin regular-premium products, are very profitable, partly because of a lack of competition. More than half of ABC's outlets are in rural areas.
China Life said late on Tuesday that it earned 18.2 billion yuan ($2.7 billion) in the first half, up 15 per cent from a year ago.