Fubon Eyes Potential Chinese Life Insurance Venture

Posted on Oct 25, 2010 by Sergio Ulloa (G+)

The life insurance arm of Taiwan's Fubon Financial and the Chinese Nanjing Zijin Investment Co are gearing up for a joint venture in China's life insurance market. Reports from China estimate that both parties may invest as much as 400 million yuan (US$59.50 million) in forming a new Chinese life insurance company. The move by Fubon will further strengthen its presence on the mainland, which has emerged as the world's fastest growing economy in recent years. The life insurance arm of Fubon and Nanjing Zijin are expected to sign a letter of intent on the joint venture in the Chinese insurance market in the near future. There has been an increase in business activities between Taiwan and the mainland after a landmark free trade agreement - the Economic Cooperation Framework Agreement (ECFA) - enabled a strengthen in ties. The free trade agreement gave Taiwanese and Chinese businesses greater access to each country's financial services markets, making it easier to invest. With the free trade agreement between the countries also allows companies such as Fubon to enter the Chinese market with greater ease. This may be tempting for Taiwanese insurers looking to expand into the mainland, as the Taiwanese insurance market has matured with significant development since the 1970's and 1980's, but in recent years has been largely static and faces tough times. The potential deal by Taiwanese Fubon comes at a time when the life market in Taiwan has struggled to generate growth in premiums in comparison to fellow Asian markets. If the deal is finalized it will mean that the Fubon's life insurance arm can be certain they have the opportunity to expanded in the Chinese insurance market; a market in which global insurers are now keen to gain a presence. Fubon has been at the center of Taiwanese businesses building closer ties with mainland China, with an office located in China for almost a decade. Fubon Life has also cemented a presence in Vietnam, in order to gain optimum exposure in this country's developing economy. The Vietnamese insurance market has experienced significant growth, with Fubon Life being the first Taiwanese life insurer in the country - Fubon Insurance (Vietnam) Co Ltd reporting a profit of VND 6.35 billion (US$31 million) in 2009. In 2009, Fubon Taiwanese rivals Cathay Insurance - a subsidiary of Cathay Financial Holding - was given approval by the China Insurance Regulatory Commission to establish a non-life business in the Chinese province of Fujian. Fubon Financial acquired a share in China-based Xiamen City Commercial Bank in 2009, which was the first move by a Taiwanese based financial institution to purchase a stake in a bank on the Chinese mainland. The Xiamen City Commercial Bank will be used as a distribution channel for Fubon insurance products. Fubon Financial is the second largest financial holding company in Taiwan with total assets of NT$2.7 Trillion (US$83 billion), with subsidiaries including Taipei Fubon Bank, Fubon Insurance, Fubon Life, Fubon Bank (Hong Kong), and Fubon Securities. Fubon Life was established in 1993, with a broad product range in the life insurance sector including life, health and injury insurance. In 2009, the Chinese life market was estimated at being worth CNY1 trillion (US$146 billion) in premiums. Earlier this year Fubon received approval from the China Insurance Regulatory Commission to set up a non-life insurance company in the Chinese city of Xiamen. The Chinese non-life company is a joint 50-50 venture between Fubon Insurance and Fubon Life Insurance. The non life unit is expected to be trading by the end of 2010, with initial products covering fire and property insurance. The primary target is Taiwanese enterprises already present in the Fujian province, with gradual expansion of the business. In 2008, the Chinese non-life market was estimated to have increased by 17.23% with motor and property insurance being the main two non-life products. Insurance Company Mentioned: Fubon Life Fubon Life was founded in 1993 and is based in Taipei, Taiwan. Fubon Life provides life insurance and health insurance services. Fubon Life Insurance Co. Ltd. was formerly known as Fubon Life Assurance Co., Ltd. and change its name to Fubon Life Insurance Co. Ltd. in June 2009. Fubon Life operates as a subsidiary of Fubon Financial Holding Co. Ltd.