Evergrande Real Estate Group Ltd., China’s third-largest developer, bought a 50 percent stake in Great Eastern Life Assurance Co.’s Chinese joint venture for 3.9 billion yuan ($610 million) to diversify into insurance. The insurance regulator approved the purchase and Great Eastern Life Assurance (China) Co. will be renamed Evergrande Life Insurance Co., the homebuilder said in a filing to the Hong Kong stock exchange on Sunday. The price was more than twice the 1.6 billion yuan asking price when the stake was offered for sale in August at a local exchange in the southwestern city of Chongqing, where the insurer is based, according to sale documents. Evergrande has made a series of costly acquisitions this year, including paying a record $1.6 billion for Mass Mutual Tower in Hong Kong, as a recovery in China’s housing market helped boost revenue. The latest purchase will increase Evergrande’s risk profile as it enters a new business, and the homebuilder faces the uncertainty of turning the unprofitable insurer around, according to Moody’s Investors Service. “This is certainly not positive for its rating,†Franco Leung, Hong Kong-based senior analyst at Moody’s, said by phone. Shares Jump Evergrande shares jumped 5.4 percent to HK$6.81, the highest since May, at the midday break in Hong Kong. The shares have more than doubled this year, while the Hang Seng Mainland 100 Index is down 5.8 percent. GELC, as the insurance joint venture is called, reported a 48.2 million yuan loss for 2014, according to its website. Evergrande raised its 2015 sales target 20 percent this month after sales jumped, becoming the first among domestic peers to do so. GELC is a joint venture set up in 2006 by Great Eastern Life Assurance Co. of Singapore and Chinese investors. Evergrande is buying a 25 percent stake each from two local shareholders.
Source: Reuters.comEvergrande Buys Insurer as China Developer Diversifies
Industry: Other 2015-11-26
