Allianz investment in China Pacific welcomed by analysts

The $855m investment from Allianz in H-shares issued by CPIC, which it is purchasing as part of a sale by Carlyle Group LP, raises Allianz's stake in the Chinese insurer to 240m H-shares, or 2.8% of CPIC's total outstanding shares and 10.4% of the H-shares. It has been seen as a sensible move by analysts that will bolster Allianz’s presence in a key growth market. The investment ‘makes sense strategically, as China is a market that's growing strongly but also is a difficult market, and foreign companies need a local partner there’, LBBW analyst Olaf Kayser told the newswire Dow Jones. The investment can clearly be considered a strategic investment, but a stake of below 3% ‘is not a big thing’, he pointed out. hideAllianz previously invested an initial $150m in CPIC during the initial public offering of the H-shares in December 2009. H-shares are shares of a company incorporated in the Chinese mainland that are listed on the Hong Kong Stock Exchange or other foreign exchanges, and are denominated in Hong Kong dollars. CPIC Group is among the three largest life insurers and property insurers in China. "We are pleased to have the opportunity to increase our long-term investment in CPIC, as we continue to strengthen our position in this important growth market," said Allianz Chief Executive Officer Michael Diekmann. Allianz also has a strategic cooperation in China with Industrial and Commercial Bank of China Ltd. Late last year Allianz China P&C (AZCN) won the award for the Annual Best Foreign P&C Insurer for providing professional and innovative products and services, maintaining stable growth and establishing an efficient operation platform at the 2009–2010 Golden Dragon Awards for Chinese financial institutions. Established seven years ago, AZCN offers a series of insurance products including property, liability, marine, engineering, and domestic credit insurance, as well as short-term health insurance and accident insurance for clients within the province of Guangdong including Shenzhen. At the same time, AZCN also underwrites large scale commercial risk throughout the country. In addition to its traditional product line, AZCN has introduced Film/TV Production Insurance, Film Producer Error and Omission Liability Insurance and Yacht Insurance. AZCN achieved gross written premiums of over RMB290m in 2009. Since then it has expanded businesses by opening sales centres in Shenzhen, Dongguan, Foshan and Jiangmen. In July 2010, AZCN was successfully converted into a Guangzhou-based subsidiary, fully owned by Allianz. As a result, it can apply for branches and conduct business in provinces, autonomous regions and municipalities beyond the Guangdong province, on the southern coast of mainland China. Insurers are increasingly looking to expand into the Asia Pacific area and into China in particular. In December 2010 XL Group was granted a license by the China Insurance Regulatory Commission (CIRC) to operate as a P&C company in Shanghai. XL Insurance (China) Company Limited will be led by Zheqiang (Al) Xie, who has been appointed as chairman and CEO of the subsidiary. It will begin business operations after the completion of all the regulatory registrations. Mike McGavick, XL's Chief Executive Officer, said: "The Chinese insurance market has great strategic importance to XL. Shanghai plays a key role in China's economy, with a GDP year on year growth of 8.2% in 2009. It delights us to bring our global experience and underwriting expertise to China's vibrant economy. We are grateful to CIRC for their support and look forward to contributing to the development of the insurance industry in China and to the country's national policy to build Shanghai into an international financial and shipping centre." Andrew Vigar, XL Insurance's Regional Manager Asia, added: "As the country with the third highest number of Fortune 500 companies, we expect our products and services in the Property, Casualty, Specialty and Professional lines to respond to the needs of expanding Chinese companies." Having started his career with the former People's Insurance Company of China (PICC) in Beijing, Mr Xie brings twenty years of experience in the Chinese insurance industry. In 1995 he was seconded to London to work in the PICC's UK subsidiary. Prior to joining XL Insurance, he held several management roles with Lloyd's in China, including setting up the Lloyd's representation in China and establishing Lloyd's full reinsurance operation, launched in Shanghai in 2007.

Allianz investment in China Pacific welcomed by analysts

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