China Pacific to Discuss Buying $2 Billion Stake in Swiss Re

(Bloomberg) -- China Pacific Insurance (Group) Co. is in talks to invest at least $2 billion for a stake in Swiss Re AG as it seeks to build partnerships overseas, according to people familiar with the matter.

Swiss Re would also spend $500 million to $1 billion for a minority stake in China Pacific as part of the deal, the people said, asking not to be identified because the information is private. Discussions are at an advanced stage and an agreement may be reached soon, though talks could still be delayed or fall apart, the people said.

Swiss Re said in a statement Wednesday it has been exploring a potential investment in a sale of new securities by China Pacific. No definitive agreements have been reached, and a deal would depend on factors including whether China Pacific decides to proceed with the offering, according to the statement.

The Swiss company’s shares rose as much as 2.3% in Zurich trading on Wednesday, valuing the business at about $35 billion. Swiss Re doesn’t currently have plans to issue new stock or make treasury shares available to any potential investor, it said in the statement, declining to comment on whether China Pacific would buy a stake.

Swiss Re is keen to expand its footprint in Asia, betting on growing demand for insurance from the rising middle class in the region. The reinsurer said in May that it would continue to welcome an anchor investor after Japanese billionaire Masayoshi Son’s SoftBank Group Corp. ended its pursuit of a stake.

The reinsurer has held discussions with Chinese authorities about an investment in embattled insurer Anbang Insurance Group Co., Bloomberg News reported last year. Swiss Re is a minority shareholder in FWD Group Ltd., the acquisitive Asian insurer backed by Hong Kong tycoon Richard Li.

China Pacific, listed in both Hong Kong and Shanghai, said in September it plans to sell global depository receipts and list them on London stock exchange. The GDR sale would represent no more than 10% of its A-share capital, the company said, adding the proceeds will be used to replenish capital and fund overseas development. The insurer didn’t give a timeline for the transaction.

What Bloomberg Intelligence Says:

Swiss Re may offload even more shares of New China Life to help fund a possible investment in CPIC, as we see it. The Swiss reinsurer already slashed its stake in New China Life to 2.5% from 4.9% in 2017. Though Swiss Re isn’t short of cash, the key question is whether it believes having exposure to head-to-head competitors in China is ideal.

- Steven Lam, analyst

Click here for the research.

Swiss Re could invest in China Pacific through the GDR program, one of the people said. A representative for China Pacific didn’t immediately respond to requests for comment.

Shares of China Pacific climbed as much as 2% in Hong Kong on Thursday, while they gained as much as 2.5% in Shanghai.

--With assistance from Marion Halftermeyer and Zhang Dingmin.

To contact the reporter on this story: Manuel Baigorri in Hong Kong at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, Ben Scent

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