The private equity unit of Goldman Sachs has emerged as a leading contender to acquire a minority stake in a Chinese life assurer being sold by Axa.
People familiar with the situation said that Goldman's principal investment arm is in talks to acquire some, or all, of the 15.6 per cent stake in Taikang Life being sold by the French insurer.
The Government of Singapore Investment Corp, the sovereign wealth fund, which holds 8 per cent of Taikang Life, is also considering raising its stake.
Axa's stake, estimated to be worth $1bn, offers exposure to China's fast-growing life assurance sector.
A minority stake is especially attractive for financial investors such as Goldman Sachs because Taikang Life is pushing for a stock market listing, a move that would provide shareholders with a clean exit route.
Goldman Sachs' principal investment arm has successfully invested in financial companies across Asia over the past 15 years.
It was an early investor in Ping An, Taikang Life's larger rival, before its stock market listing in 2004.
Taikang Life has a market share of about 8 per cent, in a sector dominated by China Life and Ping An. It has total assets of $28bn and net income last year reached approximately $250m.
Axa last year appointed Morgan Stanley to advise on the sale, which has been triggered by regulatory demands.
The French insurer also owns a 51 per cent stake in an insurance joint venture with China Minmetals Corp, formed 10 years ago, and inherited the Taikang stake when it acquired Winterthur Life from Credit Suisse in 2006.
Chinese regulations prohibit overseas groups from having financial interests in more than one insurance company.
Axa decided to sell its Taikang Life stake several months ahead of a divestment deadline.
As well as foreign shareholders, Taikang Life is owned by a multitude of domestic investment groups, which could also acquire the Axa stake.
Global private equity groups have also studied a possible bid for the stake.
Depending on the sale price struck with an eventual buyer, people familiar with the matter said that GIC could instead decide to reduce its stake.
Some overseas shareholders in Taikang Life are believed to have "tag along" rights, which enable them to divest shares at the same price as other significant shareholders.
Goldman, Morgan Stanley and GIC declined to comment.
"The situation remains fluid and any foreign bidder might also try to team up with local groups to smooth the regulatory path," said one participant in the sale process.
China's life assurance sector is growing rapidly from a low base, with a penetration rate of 2 per cent.
The country is the world's seventh-largest market for life assurance, and McKinsey estimated in a report last year that compound annual growth rates would exceed 15 per cent in China for the next five years.
McKinsey estimated that between 2007 and 2012, tens of millions of households in China would cross the $10,000 annual income threshold.
This would create a vast pool of customers who could afford to purchase life assurance.
