Zurich Financial Services Group has agreed to sell 5% of its stake in the New China Life Insurance (NCI) to undisclosed buyers, reducing its stake in the Chinese firm to 15% from 20%.
In early February, Zurich’s 20% stake in NCI had been revalued up by approximately $1bn as of 31 December 2010.
The insurer said that the sale price for the 5% stake in New China Life Insurance is slightly above the respective book value at year-end.
With gross written premiums of $13.8bn in 2010 and a compound annual USD premium growth rate of 40% from 2005 to 2010, NCI had an 8.9% share of the Chinese life insurance market as of December 2010, as reported by the China Insurance Regulatory Commission (CIRC).
In 2000, Zurich first invested in NCI, which was unlisted then. Zurich’s investment in NCI was $131m as of 30 June 2010.
In addition and as part of NCI’s recently announced capital increase program, Zurich in October 2010 announced its commitment to purchase up to 280 million new NCI shares at a fixed price of RMB10 per share, or a total of approximately $420m.
Zurich CEO Martin Senn said that the decision to sell 5% points of stake in NCI reflects a desire to manage the financial exposure to a business the company does not control while retaining the belief that China’s fast-growing insurance sector represents a highly attractive investment opportunity for Zurich.
"The Chinese government has expressed a clear intent to further develop the country’s insurance market and NCI is well-positioned in the life market. In addition to our investment in NCI, we continue to focus on building our own insurance business in this important growth market," Senn said.
The transaction is subject to the approval of the relevant regulatory authorities, and is expected to close in the second quarter of 2011.