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New China Life May Sell $780 Million to Cornerstone IPO Buyers

New China Life Insurance Co., the insurer backed by Zurich Financial Services AG, may sell $780 million of its initial public offering to so-called cornerstone investors including D.E. Shaw & Co. and Khazanah Nasional Bhd., two people with knowledge of the matter said.

Great Eastern Holdings Ltd. agreed to invest $380 million in the IPO, according to a statement from the Singapore-based insurer today. DE Shaw and Khazanah, Malaysia’s sovereign wealth fund, each plan to invest $150 million in the IPO, while MBK Partners Ltd. may buy another stake worth $100 million, said the people, who asked not to be identified because the information is private.

Cornerstone investors are guaranteed stock in an IPO in return for commitment to hold on to their stakes, typically for six months. New China Life, based in Beijing, may raise up to $3 billion from the sale of shares in both Hong Kong and Shanghai.

The insurer is seeking to bolster its capital base through the stock sale, according to a term sheet sent to investors on Nov. 21. The IPO comes as shares in major Chinese rivals have plunged on declining solvency ratios. China Life Insurance Co. and Ping An Insurance (Group) Co., the country’s two biggest insurers, have both fallen about 38 percent in Hong Kong this year.

25 Million Customers

Sources of “capital replenishment” for Chinese insurers are “limited,” Chen Wenhui, deputy chairman of the China Insurance Regulatory Commission, said at a conference in Beijing on Nov. 12. The country should allow insurers to sell subordinated bonds and explore the possibility of selling bonds in Hong Kong and overseas, he said.

Founded in 1996, New China Life had about 25 million individual customers at the end of June, according to a filing to the China Securities Regulatory Commission on Nov. 11. The company ranked fourth among Chinese life insurers by premium income in this year’s first nine months, government data show.

New China Life plans to start Hong Kong trading on Dec. 16, according to the term sheet. The company plans to issue up to 158.5 million shares in Shanghai and as many as 358.4 million shares in Hong Kong, according to the Nov. 11 filing.

BNP Paribas SA, China International Capital Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and UBS AG are among banks arranging New China Life’s IPO.

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