AXA, ICBC Launch ICBC-AXA Life JV
By Jenkin | Published July 23, 2012
In recent announcements, AXA, the Industrial and Commercial Bank of China Co Ltd (ICBC) and Minmetals declared the launch of their foray into the China insurance market for life insurance. Officially branded as ICBC-AXA Life, the company recently received official approval from China’s State Council and all other relevant governing bodies to do business in the country. This follows the acquisition of 60 percent of the equity stake in AXA-Minmetals by ICBC.
ICBC-AXA Life represents AXA’s long term commitment to the Chinese market, according to Henri de Castries, Chairman and CEO of AXA. By partnering with ICBC, AXA stands to gain significantly in terms of expertise and experience, bringing diversified and comprehensive insurance coverage for the Chinese market.
Prior to the partnership, AXA and Minmetals formed the venture known as AXA-Minmetals and was established in 1999. In October of 2010, ICBC acquired a 60 percent equity stake in AXA-Minmetals, resulting in an equity split of 60 percent ICBC, 27.5 percent AXA, and 12.5 percent Minmetals. The equity stake was purchased for 1.2 billion yuan by ICBC and prior to the acquisition, the equity split was 51 percent-50 percent AXA-Minmetals.
With headquarters in Shanghai and operations in over 20 major cities and provinces, ICBC-AXA intends to service a vast majority of China. Beijing, Shanghai, and Guangzhou will serve as major service hubs. Some of the products which ICBC-AXA will offer include education, family protection, wealth management, and retirement insurance advice and services.
ICBC-AXA will be leveraging ICBC’s 282 million clients and expertise in the Chinese financial industry. The strategic move on both parties should prove to set a new precedent as China’s power player teams up with Europe’s largest insurer. Ambitious plans are in place as ICBC-AXA strives to be the leading provider for insurance in China.
In recent statements, Mr. Castries was quoted as saying that Europe looks like Chernobyl before the explosion, indicating forecasts of tumultuous times ahead. The development of ICBC-AXA represents a diversified move for AXA and a new area of opportunity for ICBC. As financial woes continue to haunt the financial industry, the insurance industry represents a stable move despite the large gains that can be achieved through it.
The Chinese market is difficult to penetrate due to strict Chinese government oversight and regulation. As such, China represents a significant opportunity due to its sheer size of population. Previously, AXA utilized Minmetals’ network and Chinese state-controlled status to break into the Chinese market. However, as Minmetals is a mineral and metal company, AXA stands to gain much more through the help of ICBC’s broad reach within the relevant sector.
The Chinese market is expected to grow at an average rate of 12 percent per year between 2010 and 2020, according to analysts. Chinese national companies maintained a 95 percent market share on life insurance and 99 percent in damage products, while more than 50 foreign players were struggling to win more of the market for general lines. AXA aims to bypass regulatory brakes which have restricted the company’s ability to compete in the past. ICBC has agreed to distribute AXA’s product in over 16,000 branches. AXA remains dedicated to the Chinese market and is actively trying to withdraw from activities within Australia and New Zealand.
Appointed as the Chairman of the Board of ICBC-AXA Life is Mr. Sun Chiping and President Mr. Jamie McCarry will oversee the day-to-day business operations of the newly formed joint venture.
While AXA is attempting to significantly increase market share in China, ICBC is actively trying to increase their market share in Europe. It is understood that ICBC will leverage AXA’s connections and expertise within the European market to help ICBC expand.
ICBC is the world’s largest bank by market capitalization and is looking to diversify its holdings outside of banking. ICBC is one of China’s four state-owned commercial banks and was initially founded as a limited company in 1984. It entered two stock markets simultaneously, Hong Kong and Shanghai, in the world’s biggest initial public offering at the time, featuring $21.9 billion US in public funding.
As Europe’s second largest insurer, AXA Group is a worldwide leader in insurance and asset management. With over 101 million clients in 57 different countries, AXA boasts revenues of over 86 billion euro and earnings of over 3.9 billion.
Minmetals, officially China Minmetals Corp, is China’s largest metal trader. Minmetals specializes in the production and trading of metals and minerals, namely copper, aluminum, tungsten, tin, antimony, lead, zinc, and nickel. As a state-owned enterprise, Minmetals is under the jurisdiction and laws of China.
Insurance Companies Mentioned:
AXA the global insurance group in Paris