AgBank to acquire 51% stake in Jiahe Life

The lender plans to subscribe to 1.04 billion new shares to be issued by the insurer worth $392.55mn overall.

Agricultural Bank of China Ltd. (1288.HK) said Friday its board of directors approved its plan to buy a 51% stake in Beijing-based Jiahe Life Insurance Co. for CNY2.59 billion (US$393 million), in the bank's first foray into the insurance market.

The deal will give China's third biggest bank by assets direct access to the nation's lucrative insurance market.

AgBank, which last year raised US$22.1 billion in the world's second biggest initial public offering after General Motors Co., said it plans to subscribe to 1.04 billion new shares to be issued by Jiahe Life Insurance.

Beijing-based Jiahe Life Insurance was set up in 2005 by a group of Chinese companies. It has operations in 15 cities and provinces in central and eastern China.

China has been slowly allowing banks to expand into non-banking financial services, though it is still far behind more developed markets like the U.S., where banks have since the 1990s offered a broad range of financial services.

Bank of Communications Co. became the first Chinese lender to break into the insurance sector early 2010 when it launched an insurance joint venture with Commonwealth Bank of Australia after a nearly two-year application process.

View the full story in The Wall Street Journal.