AIG buys stake in Chinese property/casualty insurer.

American International Group Inc. will invest in the initial public offering of Hong Kong-based PICC Property & Casualty Co. Ltd., marking further inroads by a western insurer into the burgeoning Chinese market.

PICC, whose parent is the quasi-governmental People's Insurance Company of China, is the largest non-life insurer in the country. AIG said it would take a 9.9% stake in the company, as well as provide reinsurance for some of its accident and supplemental health insurance businesses. Terms of the transaction weren't disclosed. However, the Chinese government planned to sell as much as 30% of PICC in a late October IPO expected to raise between $500 million and $750 million, which would put the AIG stake at between $150 million and $300 million.

Other western financial-services companies to take shares of Chinese insurers include the U.K.-based bank HSBC Holdings plc, which bought a $600 million stake in life insurer Ping An Insurance Co. in October 2002, representing 10% of the company's equity. Goldman Sachs and Morgan Stanley also have stakes in Ping An.

Fifteen new foreign-capital insurance companies were granted licenses to operate in China in the past two years. Recent entrants include broker Aon Corp., which was granted a license for a joint-venture brokerage. ING Group gained a license for a life insurance joint venture in Dalian, its second insurance foray into China. Cigna Corp. also launched a life insurance joint venture, in the city of Shenzhen.