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Opinion | There is little comfort from the line-up of main investors

PICC is keen to float and that puts it in a weakened bargaining position. Further, it may be doing the right job, but not a great one

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The initial public offering of the mainland's largest general insurer, People's Insurance Company (Group) of China (PICC), raises lots of doubts.

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The firm is trying to answer them with a US$500 million investment by American International Group. Yet, can it?

PICC gets 90 per cent of its profit from its property and casualty insurance business, which is already listed in Hong Kong via its PICC Property and Casualty (PICC P&C) unit. Question No 1 is: Why put your money into the parent and add the risk of its underperforming life and health business?

On the surface, AIG is the perfect answer. It has held 9.9 per cent of PICC P&C since 2003. It has been busy selling assets to repay the US government's bailout fund. There must be something very good in PICC for it to put in its hard-earned cash.

Comparing the present deal with the one in 2003, that "something very good" seems more so for AIG than PICC shareholders.

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A condition of the new deal is AIG can dump its PICC stake if the firms fail to agree on the establishment of an insurance agency joint venture by May 31 next year, That puts PICC in a very weak position in its joint venture negotiations.

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