Carlyle sells US$860m of insurer's shares

PUBLISHED : Friday, 31 December, 2010, 12:00am
UPDATED : Friday, 31 December, 2010, 12:00am

US private equity Carlyle Group has sold about US$860 million worth of shares in China Pacific Insurance, the mainland's third-largest insurer.

Carlyle, which first invested in the company in 2005, has sold 215 million shares in China Pacific at HK$31.15 each, a source with direct knowledge of the deal was quoted by Reuters as saying.

Carlyle declined to comment, while China Pacific was not available for comment.

Carlyle held a 57 per cent stake, or 1.32 billion shares in the insurer's H-shares before the offload, which now leaves it with an estimated 47.88 per cent. It is widely expected that the private equity fund will reduce its holdings gradually. The lock-up period expired last week.

As a financial investor which pursues short-term returns, Carlyle's initial investments of about US$800 million between 2005 and 2007 have increased in value more than six times to US$5.4 billion, based on the H-share closing price yesterday.

Earlier this year, Newbridge Capital, the Asian unit of US-based TPG Capital, sold its Shenzhen Development Bank stake for seven times what it paid about five years ago.

China Pacific's share price rose 2.39 per cent to HK$32.1 yesterday, with analysts optimistic about further gains as the uncertainty of Carlyle's share sales fades and expected official interest rate hikes are tipped to drive up insurers' investment yields.

Analysts with Credit Suisse said this week in a research note issued before the transaction that a selldown by Carlyle could help improve the stock's liquidity.

China Pacific's accumulated premium income rose 43 per cent from a year earlier to 128.9 billion yuan (HK$151.23 billion) in the first 11 months of this year, including 82.2 billion yuan from life insurance and 46.7 billion yuan from property insurance.

'Insurance stocks will benefit from interest rate hikes, as well as an apparently improved investment environment and preferential tax policy for endowment insurance,' said Sun Ting, an analyst with Shanghai-based Shenyin and Wanguo Securities which rated China Pacific 'outperform'.

The mainland's total insurance premiums rose 31.6 per cent in the first 11 months of the year to 1.34 trillion yuan from a year earlier, according to the China Insurance Regulatory Commission. The commission said total profits in the insurance sector reached 57.7 billion yuan in the first 11 months, up 25.1 per cent.