China's Ping An buys Fortis stake for $2.7 billion

By Donny Kwok and Tony Munroe

HONG KONG (Reuters) - Ping An Insurance (Group) Co (2318.HK: Quote, Profile, Research, Stock Buzz), China's No.2 life insurer, bought a 4.2 percent stake in Dutch-Belgian financial services firm Fortis (FOR.AS: Quote, Profile, Research, Stock Buzz)(FOR.BR: Quote, Profile, Research, Stock Buzz) for $2.7 billion, the latest in a spate of overseas investments by Chinese financial firms.

The deal, which makes Ping An the top shareholder in Fortis, is the largest overseas acquisition by a Chinese insurance company, and follows the insurer's recent $154 million purchase of 9 percent of Hong Kong fund manager Value Partners (0806.HK: Quote, Profile, Research, Stock Buzz).

Chinese financial firms, armed with cash and world-beating valuations, are scouring the globe for acquisitions, eager to invest in subprime-hit U.S. and European counterparts.

"We're at the cusp of Chinese companies getting big enough and sufficiently well capitalized that they're looking to dip their toe in the water in terms of international expansion," said Anthony Muh, executive director at AllianceTrust Asset Management, which manages about $1 billion in Asian equities.

"We're definitely going to see a lot more of that," he added.

The investment, which came from policyholder funds, caught some observers by surprise, sending Ping An shares up nearly 9 percent. Under Beijing's rules, Ping An, which is about 17 percent owned by HSBC Holdings (HSBA.L: Quote, Profile, Research, Stock Buzz)(0005.HK: Quote, Profile, Research, Stock Buzz), can invest about 5 percent of its assets overseas, and the Fortis stake accounts for roughly two thirds of that.

"They've used policyholder funds or investment funds rather than their own capital to make the investment, so it has to stack up in investment terms," said Credit Suisse analyst Bill Stacey.

Ping An President Louis Cheung will take a seat on the board of Fortis, which is the sort of diversified financial services holding company that Ping An aspires to be. The companies did not outline any specific cooperation plans going forward.