China Life Insurance Co, overtaken by rivals in a race for foreign investors, is accelerating its search for a global partner nearly three years after a deal with Citigroup Inc fell through.

 

Talks with Citigroup over selling a 25-percent stake stalled over price disputes in 2003, according to two China Life sources, sending the mainland's top life insurer back to the negotiating table with a list of 19 potential candidates.

 

While China Life has struggled with false starts, fellow insurers Ping An (Group) Co, China Pacific Life Insurance and PICC Property & Casualty have signed on with big foreign institutions to help boost credibility with overseas investors and high-end customers.

 

China Life enters 2006 with a revamped management team that has a renewed focus on finding the right partner. "First, we want the strategic partner to help us to solve some problems in our company's corporate governance and structure," said Cao Qingyang, general manager of investor relations at China Life's headquarters in Beijing. "Secondly, it is good for our company's business development in the future," he said, adding that the partner will not necessarily be an insurance company.

 

Yang Chao joined China Life as president in June and has since become the company's chairman, ceding his president's role to Wu Yan. "After Mr Yang joined China Life, the progress has been accelerating," said Cao, declining to give a timeframe for when a partner might be selected.

 

China Life shares have soared since the company raised US$3.5 billion in a joint listing in Hong Kong and New York in December 2003, more than doubling from their IPO price of HK$3.59.

 

Citigroup, along with China International Capital Corp, Credit Suisse First Boston and Deutsche Bank, helped underwrite China Life's 2003 IPOs.

 

China Life's stock hit a rough patch and bottomed in May 2004 after it became the target of US investor lawsuits accusing the company of failing to disclose a State audit report uncovering accounting irregularities at its State-owned predecessor firm.

 

But investors have returned in force, drawn by China Life's dominant market position. The backing of a global strategic investor could send shares even higher. "Having a strategic investor of good reputation within the industry would help people have greater confidence investing in China Life," said analyst Bob Leung of Merrill Lynch, who has a positive rating on the shares. "They certainly want to improve the corporate governance side of things," he said.

 

China Life shares have even outperformed those of Ping An since May 9, when HSBC Holdings Plc agreed to pay US$1.04 billion to raise its stake in China's number-two life insurer to 19.9 percent. "Some of them (investors) view that because (China Life) haven't brought in a strategic shareholder, there may be more upside," said UBS analyst Sally Ng.

 

China Pacific sold a 25-percent stake to US insurer Prudential Financial Group and buyout firm Carlyle Group for US$410 million last month while American International Group owns 9.9 percent of top non-life insurer PICC.

 

In August China Life said it had a list of 19 potential investor candidates, including AIG, and sources say that is still the number of companies under consideration.

 

Citigroup is also still on the list, sources said.

 

Investment bankers, hungry for fees, have been pushing China Life to complete a deal, but complications abound and many global insurers are tied up with their own Chinese joint ventures, which may preclude a China Life investment.

 

As a result, China Life is pursuing a wide range of suitors outside of the insurance sector that can match up to the company's large size - more than US$25 billion in market capitalization. "It is not necessary for China Life to find a US or foreign counterpart who is also an insurance business," said a Shanghai-based insurance executive who has been briefed on the company's situation.

 

Because of China Life's dominant network and client base, the firm is less concerned about help on the insurance side and is looking more to enhance internal controls and reputation, perhaps with an asset management or private equity partner, he said.

 

(China Daily January 13, 2006)