American International Group, the US-based insurer, said Thursday it plans to take a 9.9 per cent stake in PICC Property and Casualty, China’s largest property insurer, as part of a strategic alliance with the mainland company ahead of its listing next month.
AIG SAID it would cooperate with PICC, which is set to begin marketing the $500 million initial public offering next week, to develop accident and “supplemental health insurance products” in China.
“AIG will share in the growth of this business through a reinsurance arrangement under which PICC P&C will reinsure certain accidental and health risks in China with AIG subsidiaries,” AIG said in a statement.
PICC is the first of three major Chinese insurers planning to list on international markets over the next few months as part of moves by Beijing to reform the sector through partial privatisations, which may help the domestic players cope with increasing foreign competition.
For PICC, the presence of a large strategic foreign investor will serve as a vote of confidence in its IPO, whose fortunes will in turn determine the prospects of the planned offerings by its peers, China Life and Ping An.
The deal follows efforts by other mainland Chinese companies to seek prominent foreign investors ahead of their listings. Bank of China (Hong Kong) sold a stake to Standard Chartered through its IPO and Sinopec invited Exxon Mobil, BP Amoco and Royal Dutch/Shell to buy its shares.
Based on market expectations that PICC will list a 25 per cent stake for US$500m, AIG’s stake would be valued at about US$200m.
However, AIG declined to reveal details regarding the deal. It remains unclear whether it would purchase the stake via the IPO or buy the shares separately.
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