IAG is continuing on its Asian acquisition splurge, signing a deal with Shanghai-based China Pacific Property Insurance which sets out the key terms of proposed investment in the company.

The group cemented its intention to take a bigger-than-expected 24.9% share in the Chinese company in a deal worth up to $400 million.

With the option to increase its stake in China Pacific to up to 40%, IAG could ultimately pay up to $550 million.

CEO Michael Hawker went to China recently to sign off on the deal after nearly 12 months of discussions between the two companies.

China Pacific Property, a subsidiary of the larger China Pacific Insurance Group, generated gross written premium of about $2.2 billion in the 10 months to October 2005.

The investment in China Pacific is in line with IAG’s strategy to build a portfolio of insurance assets in Asia to supplement its businesses in its home markets of Australia and New Zealand.

The shareholding will be added to the group’s existing Asian insurance assets in Thailand, Malaysia and Singapore, and its 100%-owned China Automotive Association roadside assistance company in Beijing.

IAG plans to source up to 40% of earnings offshore in Asia to offset slowing growth in the Australian and NZ insurance markets. The general insurance sector in China has grown by 15.5% a year for the past five years, while the motor vehicle insurance industry has increased an average of 18.5% a year for the past five years.

Meanwhile the No 1 insurer announced yesterday it has increased its stake in Thailand’s Safety Insurance Public Company from 21.6% to 38.3% and it’s seeking to increase it further.

IAG says it will attempt to increase its interest in the Thai insurer through a general tender offer to all Safety Insurance shareholders. The tender is expected to be delivered to shareholders and published on the Stock Exchange of Thailand soon.

“Increasing the group’s interest in Safety Insurance is another step towards ensuring the group will be a key player in fast growing Thai insurance industry, in line with its Asian expansion strategy,” IAG said in a statement.