Baosteel Group Corp will buy 90.1 million shares in New China Life Insurance Co, taking its stake in the insurer to 17.3 percent, the regulator said yesterday.

The share transfer from Shenhua Group Co will add to Baosteel's existing 9.7 percent stake to make it the third largest shareholder.

"Shenhua Group Co will transfer the shares to Baosteel, after which Shenhua will no longer hold a stake in the insurance company," the China Insurance Regulatory Commission (CIRC) said yesterday.

As the largest steel firm in the country, Baosteel has shown growing interest in the insurance sector. The company's wholly owned subsidiary Huabao Investment is the largest shareholder in China Pacific Insurance Co, with a 21.43 percent stake.

Baosteel has also invested 50 million yuan in Huatai Property and Casualty Co. According to sources the steelmaker also plans to set up a joint venture with Dai-ichi Mutual Life Insurance Co, Japan's second largest life insurer.

"As Baosteel has a healthy cash flow, it is natural for the company to seek investment opportunities. With huge growth potential, insurance companies are a good choice," said Wang Xiaogang, an analyst with Orient Securities.

Wang said Baosteel's investments in New China Life, China Pacific and Huatai should be financial, but its initiative to set up a joint venture life insurer shows it also intends to expand its core business in the sector.

Experts said the new joint venture's advantage rests with Baosteel's huge resources for group insurance.

Baosteel's large customer base will give the joint venture considerable premium income in the short term. For Dai-ichi Mutual Life Insurance Co, the large number of Japanese firms in the Yangtze River Delta also provides vast opportunities.

As the regulator encourages State-owned firms to participate in the insurance industry, Baosteel's application for the new joint venture is more likely to get approval, said Hao Yansu, a professor at the Central University of Finance and Economics.

Baosteel's shares closed at 16.91 yuan yesterday, down 0.35 percent.

According to Wang Xiaogang, China's insurance industry will see another round of expansion in the next three to five years. But the new players this time will mainly be State-owned companies and financial institutions rather than private investors.

The Industrial and Commercial Bank of China has reportedly contacted AXA and Allianz about setting up a joint venture life insurer. Meanwhile, China Construction Bank has approached Ping An Insurance Group, and Bank of Communications has applied to the CIRC to set up an insurance company.

(China Daily December 25, 2007)