DealZone

Goldman builds exposure to China insurance market

May 12, 2010

Having taken a nibble at the Chinese insurance market in December, helping number three life insurer China Pacific Insurance list a $3.1 billion IPO in Hong Kong in December, Goldman Sachs is taking a bigger bite at that most promising and enticing of global investments, China’s financial products industry.

Sources tell us that an investing arm of Goldman is in the final stages of an agreement to buy AXA’s $1.05 billion stake in Taikang Life, China’s No.4 life insurer. The deal would allow France’s AXA to shed a non-core asset, while granting Goldman a piece of China’s growing insurance industry, report George Chen and Michael Flaherty.

Several private equity firms, including Kohlberg Kravis Roberts & Co and Blackstone Group, competed in the Taikang auction, as did Singapore’s Temasek Holdings, sources have told them.

As we’re talking about Goldman’s private equity business, divining strategic intentions could be difficult beyond what looks like a potentially lucrative business. Might one detect the invisible hand of the Oracle of Omaha here? After all, Buffett, who took a confidence-building $5 billion stake in Goldman at the height of the crisis, is long both China and insurance.

A Goldman takeover of Taikang Life would interestingly also put it in indirect competition with near-collapsed insurer AIG, which has a piece of the Chinese life insurance market, albeit a small one, through its AIA unit, which sells life insurance in China. A potential showdown between Goldman and AIG would be interesting, given the already bitter history between the two companies; Goldman was AIG’s counterparty on many of the credit default swaps which sent the insurer to the brink of bankruptcy.

Of course, AIA might be on the verge of changing hands. That will happen if, and only if, Britain’s Prudential, the unit’s would-be buyer convinces reluctant shareholders to back the deal.

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