Equity Analyst: Capital Pressure Pushes Taikang Life to Shuffle Investors Ahead of IPOs

Taikang Life Insurance Co. Ltd., the fifth-largest life insurer in China in terms of premiums in 2010, has introduced two new shareholders in a move that one equity analyst said can help relieve capital pressure prior to the insurer's proposed dual listings in Hong Kong and Shanghai.

Beijing International Trust Co. Ltd., which originally held around 63.27 million shares, or a 7.42% stake in Taikang Life, has been approved to transfer 33.27 million shares to China Guardian Auctions Co. Ltd. and 30 million shares to another Beijing-based technology limited company, according to the China Insurance Regulatory Commission.

China Credit Trust Co. Ltd., another shareholder in Taikang Life, transferred all of its 50 million shares, or 5.87% stake in the insurer, to a Beijing-based investment limited company.

Following the completion of the equity transfers, China Guardian Auctions will hold around 161 million shares, or an 18.88% stake, to remain the largest shareholder in Taikang Life. The Beijing-based investment limited company and the technology limited company will respectively hold 5.87% and 3.52% stakes in the insurer, said the CIRC.

The equity transfer is "a short-term capital investment, which can help ease the profit margin pressure of Taikang Life, avoiding it to become insolvent," said Olive Xia, a Shanghai-based equity analyst at Core Pacific-Yamaichi International.

Beijing-based Taikang Life earlier said it has planned to go public in the coming two to three years, but Xia noted the insurer will not be able to float its shares in the first half of 2012 due to the market uncertainties.

Taikang Life may also "wait and see" what the market response will be to the proposed dual listings of PICC (Group), the holding company of PICC Property and Casualty, in Hong Kong and Shanghai before setting the time frame for its own listings, she added.

The regulator did not provide financial details of the equity transfer, while noting Beijing International Trust and China Credit Trust will no longer hold any shares in Taikang Life after the transactions.

Last year, investment banker Goldman Sachs won regulatory approval to acquire a 12.02% stake in Taikang Life, becoming the second-largest shareholder of the insurer. This was the first investment move involving Taikang Life after its original largest stakeholder — French insurer Axa SA — gained approval from the CIRC to sell its entire 15.6% stake in the Chinese insurer for US$1.2 billion to a consortium consisting of new and existing shareholders (Best's News Service, March 15, 2011).

The Taikang Life stake was acquired by Axa through a Winterthur transaction in 2006.

Taikang Life was established in September 1996 with registered capital of more than 852 million yuan (US$135 million). It offers life, health and accident insurance in China.

At the end of 2010, the insurer reported a solvency margin ratio of 175, down 29% from a year earlier, as the company required capital for business development and dividend distributions, as well as the impact of volatile capital markets.

In 2011, the insurer generated total original premium income of 67.94 billion yuan, noted the CIRC.

(By Rebecca Ng, Hong Kong news editor: [email protected])