HSBC is to double its stake in Ping An, China's second-largest life assurer, by buying the 10 per cent held by Goldman Sachs and Morgan Stanley for $1.1 billion in the biggest foreign investment in a Chinese insurer.

The deal struck at nearly twice the $600 million paid by HSBC for its first 10 per cent will accelerate HSBC's entry into China's fast-growing insurance market by giving it access to Ping An's 20 million policy holders and 250,000 sales agents.

HSBC's move is a sign of international groups' determination to challenge domestic companies' dominance of China's insurance market, which is forecast to double in value from the current $50 billion over the next three years.

The transaction will yield a 14-fold return on the original investment made by the private equity arms of Goldman Sachs and Morgan Stanley, one of the largest returns earned by foreign investors in a Chinese company.

The two US investment banks bought a combined 12.7 per cent stake in Ping An for a total of about $70 million in 1994 one of the first private equity investments in a Chinese company.

Their total holding was reduced to about 10 per cent when the Chinese insurer sold shares on the Hong Kong market in a $1.8 billion initial public offering last year.

HSBC bought its first 10 per cent stake for $600 million in 2002. - (Financial Times Service)