BEIJING, Dec. 20-- US buyout firm Carlyle Group said yesterday it agreed to buy a quarter of China Pacific Life Insurance Co, making the deal the biggest private equity investment on China's mainland.

Carlyle Group signed an agreement to buy a 3.3 billion yuan(US$408.7 million) stake in China Pacific Life Insurance Co(CPIC) on December 19, 2005.[newsphoto]Carlyle and Prudential Financial Inc, the third-largest US life insurer, will pay a combined 3.3 billion yuan(US$409 million) for a 24.975 percent of the mainland's No. 3 life insurer, according to a corporate statement. The statement didn't specify the investment amount from each company.

China Pacific Insurance(Group) Co, the Chinese insurer's parent, will also inject 3.3 billion yuan into the venture, the statement said.

Buying into a Chinese mainland insurer will give Carlyle a chance to exploit the country's stunning growth in the life insurance sector, which has been expanding by more than 25 percent annually in the last decade along with rising personal incomes.

China Pacific Life may go public as early as next year, company officials said earlier, a plan likely to bring Carlyle handsome profit because of the strong overseas demand for equity in mainland's financial institutions.

Wang Guoliang, chairman of China Pacific Insurance said that the agreement with Carlyle will dramatically accelerate the company's expansion plans and its participation in the world's fastest-growing life insurance market.

Currently, China Pacific Life has an 11 percent share in the China market.

Carlyle promised to lock up its holdings in the Chinese insurance venture for at least three years and plans to eventually unload its stock to Prudential.

The US firms are seeking to boost their interest to 49 percent pending government approval, and the holdings may be later transferred into stock of the parent company, China Pacific Group, according to earlier media reports.

China Pacific Life has a shortfall of as much as 9 billion yuan in capital reserves required by regulators in case policy holders rush to redeem their holdings, according to the China Insurance Regulatory Commission.

Carlyle, which has invested more than US$150 million on the mainland, in October agreed to invest US$375 million for 85 percent of Xugong Group Construction Machinery Co, a unit under China's biggest machinery firm.

China's life insurers collected premiums of 303.7 billion yuan in the first 10 months, up 13 percent on a yearly basis, according to the insurance regulator.

Overseas insurers such as American International Group and Manulife Financial Corp raised market share to more than 10 percent, up from 2.5 percent a year earlier.

(Source: Shanghai Daily)