AIG, PICC Group ink deal to sell life insurance in China

American International Group (AIG) has signed an accord with Chinese state-owned insurer PICC Group to sell life insurance in the world’s second-largest economy, as the US insurer increases its bets in an underdeveloped market.

The non-binding agreement announced on Thursday brings AIG closer to its roots in China, where the company’s predecessor was founded more than 90 years ago, and is part of AIG’s plan to invest US$500 million in PICC’s planned Hong Kong initial public offering.

People’s Insurance Company (Group) of China (PICC) is seeking to raise up to US$3.6 billion through the IPO, with AIG and other investors agreeing to buy nearly 50 per cent of the shares.

To demonstrate its commitment, AIG agreed not to sell more than 25 per cent of its stake in PICC for a period of five years after the IPO. But it may offload the entire stake if final legal documentation for the proposed venture with PICC isn’t completed by May next year, the US company said in a statement.

AIG plans to step up in presence in China, by setting up a joint venture with PICC Life, a unit of the Chinese insurer, to distribute life insurance and other products primarily in large cities.

AIG’s current Aian exposure includes a 13.7 per cent stake in its former Asian unit AIA Group and a 9.9 per cent stake in PICC Property and Casualty, a unit of PICC Group.