China's Ping An Pays $2.7 Billion for Stake in Fortis

Nov. 29 (Bloomberg) -- Ping An Insurance (Group) Co. paid 1.81 billion euros ($2.7 billion) for a stake in Fortis, Belgium's biggest financial-services company, in the largest overseas acquisition by a Chinese insurer.

Ping An, the nation's second-biggest insurance company, purchased 4.18 percent of Fortis, based in Brussels and the Dutch city of Utrecht, the Chinese firm said in a statement to Hong Kong's stock exchange today. Fortis said it invited Ping An President Louis Cheung to join its board.

Chinese companies including Industrial & Commercial Bank of China Ltd. and Citic Securities Co. have announced overseas purchases in the past six weeks, taking advantage of tumbling financial stocks. Fortis, part of a group that bought ABN Amro Holding NV, has fallen 33 percent this year as the credit-market slump hurt earnings at its insurance division.

Fortis, in a statement to Hugin wire, said Ping An's investment ``allows it to gain access to high-growth markets, in particular China.''

Ping An bought 95.01 million Fortis shares on the Euronext Brussels and Euronext Amsterdam as of Nov. 27, it said in the release.

ICBC, paying $5.6 billion for 20 percent of South Africa's Standard Bank Group Ltd.; and Citic Securities, injecting $1 billion into Bear Stearns Cos., also promised access to the world's fastest growing economy as part of their investments.

Spreading Risks

Insurance premiums in China increased 24 percent in the first nine months from a year earlier, driven by an economy that expanded 11.5 percent, according to data from the industry regulator.

China's insurance regulator has urged firms to spread risk on their more than $300 billion of assets. In July, China allowed them to invest 15 percent of assets in overseas stocks and bonds, up from 5 percent. Ping An said its acquisition was part of its strategy of ``applying its insurance funds and matching its assets to its liabilities.''

Ping An, based in the southern Chinese city of Shenzhen, quadrupled third-quarter profit to 3.6 billion yuan ($487.1 million), powered by gains on investments in Chinese stocks, the world's best performers this year. The company oversaw $45 billion of investments as of June 30.

Ping An's bigger rival, China Life Insurance Co., is also on the prowl for possible acquisitions. The world's largest insurer by market value is ``very interested'' in buying foreign banks, Board Secretary Liu Ting said yesterday.

Citigroup Infusion

``Overseas banks are looking very attractive after the subprime crisis brought their share prices down,'' said Liu at a briefing in Beijing. ``This provides great opportunities for China Life and is a very worthwhile option for us to consider.''

The MSCI World Finance Index has fallen 7.9 percent this year, the worst performance among 10 industry groups on the MSCI World Index. Citigroup Inc., the largest U.S. bank by assets, has tumbled 42 percent in New York amid mounting credit market losses, leading to the departure of Chief Executive Officer Charles Prince.

Citigroup, which until July was the world's biggest bank by market value, this week said it's receiving a $7.5 billion cash infusion from Abu Dhabi to shore up its capital.

Fortis tumbled 7.2 percent in Amsterdam on Nov. 8, the biggest drop in four years, after reporting an unexpected decline in third-quarter profit. The stock has jumped 11 percent in the past week, closing at 18.15 euros last week and giving Fortis a market value of 40 billion euros.