China's private Fosun Group and Prudential Financial Inc (PFI) have won government approval to launch a new life insurance joint venture company. It will be China's only life insurance joint venture between a private enterprise and a foreign insurer.

Fosun said the 50-50 joint venture will start with registered capital of 500 million yuan ($78 million) with each company providing 250 million yuan. The joint venture will be headquartered in Shanghai and mainly focus on the Chinese market. Operations are expected to begin in the fourth quarter of 2012, following final approval from the China Insurance Regulatory Commission (CIRC) and other authorities.

"Because the life insurance industry requires a relatively longer term of investment, we do not expect to make a profit in the initial development stage, but will focus on providing valuable services to customers," said Guo Guangchang, the president of Fosun.

"Yet we are confident that we can gain profit at a faster rate than the industry average, that is to say, we expect the joint venture to be profitable within eight years," said Guo.

China's insurance market has seen years of rapid growth, but penetration and density are still far below the average global level, indicating great growth potential. According to the CIRC, life insurance premiums (including health and personal accident insurance) amounted to 1.06 trillion yuan in 2010.

"China's insurance industry is very attractive to us, and we are looking forward to entering this market," said Mark Grier, vice-chairman of PFI.

"Although it seems that there are very strict rules and regulations in China's insurance market, which present some obstacles for foreign companies' entry, it also means sound development for the industry," he said.

"Even if the life insurance industry is not very profitable to many people's minds now, we are confident that through cooperation with Fosun, we can make great achievements in this field," said Grier.

The joint venture will not be the first area of cooperation between the companies. In January, they formed a new life insurance joint venture to invest in high-growth companies, with PFI investing $500 million and Fosun forking out $100 million.

According to Grier and Guo, the first priority of the joint venture will be to establish a management team and to begin building the company.

"We plan to recruit 80 to 100 members during the initial stage and will gradually open branches in first-tier cities and then those in the second- or third-tiers to cover most of China." said Kenny Wu, who will head the preparation team.

Fosun - Shanghai's largest private enterprise - was founded in 1992. Its current areas of interest include pharmaceuticals and healthcare, property, steel, mining and retailing.

"Currently, the market is still in fluctuation, but we expect to see double-digit profit growth this year and that the profits from the overseas investment will definitely outweigh those of last year," said Liang Xinjun, CEO and vice-president of Fosun.