Insurance giant's bank stake raises eyebrows

Despite being one of the mainland's best managed and most internationally flavoured companies, Ping An Insurance finds itself in the eye of the storm every time it attempts any major expansion these days.

After its ill-timed and disastrous foray into the overseas market, where it lost about US$3 billion from its investment in the Belgian financial conglomerate Fortis last year, the mainland's second-largest insurer vowed to focus on the domestic market.

On June 12, it said it would buy 10.7 billion yuan (HK$12 billion) worth of new shares from Shenzhen Development Bank and acquire the entire 16.76 per cent stake from Newbridge Capital, the Asian arm of the US private-equity group TPG, for 11.45 billion yuan in cash or 299.09 million H shares of the insurer. This will give the insurer about a 30 per cent stake in the bank.

The announcement of the deal worth more than 22 billion yuan immediately triggered a sharp debate in the mainland media and among investment analysts on whether Ping An had overpaid, if it had enough internal resources, or if there was any synergy.

The controversy now appears to have gone beyond the deal. Dismay has been expressed at the role of the mainland's banking and insurance regulators in the deal.

In addition, the nationalist camp, which is not happy about any foreigner profiting, has begun to make noises about the exit of Newbridge, which expects to reap a handsome gain of more than 300 per cent on its original investment in 2004 and later capital injections.