Standard Life and Bank of China JV On the Table

Posted on Nov 09, 2010 by Sergio Ulloa (G+)

Britain's Prime Minister David Cameron is leading the largest British delegation to China ever undertaken. The latest visit to China - which has the second largest economy in the world - could pave the way for increased relations between Chinese and British businesses, with the Standard Life insurance company set to become a possible beneficiary of the current trade talks. China has become a pivotal country for international governments and businesses, with a strong emphasis on building relationships as the emerging economy becomes a business hub for multi-national companies. As part of this process, the Chinese insurance industry has become one the most valuable in the world. The high-profile trade mission to China includes 50 top businessmen from British firms looking to improve trading arrangements with China, with Standard Life's chief executive David Nish also being part of the delegation. Highlighted in the trade talks is the possible ground-breaking joint venture between Standard Life and the local based Bank of China (BoC), in a deal which could see Standard Life becoming one-of-few foreign companies to own a stake in a domestic Chinese financial company. If the deal is finalized between the UK's Edinburgh based Standard Life and BoC, it will give the British insurers a huge advantage in one the fastest growing insurance markets in the world. The deal is still subject to final approval of both BoC and Chinese insurance regulators. The British insurer and pensions group Standard Life, already has a Chinese joint venture named Heng An Standard Life (HASL), which is classified as an international insurance company in China. Standard Life entered into a JV agreement with TEDA Investment Holding Corporation in 2003, with its headquarters in the northern Chinese city of Tianjin. The company started with a registered capital of RMB 1.302 billion (US$184:£115 million). Since HASL's inception, it has extended its reach across China, including opening offices in Guangdong, Beijing and Nanjing. With over 5000 employees, it has become one the largest Chinese insurance joint ventures involving an overseas insurer. Initially, HASL was created to provide plans for investment, protection, education and healthcare in an emerging Chinese market. Under the proposed deal with BOC, Standard Life's current 50 percent stake in joint venture HASL will fall to 25 percent. If the BoC and Standard Life do enter into partnership, the Chinese financial institution will hold the majority share, with Standard Life and current partners Teda International becoming minority shareholders. Bank of China's third quarter earnings for 2010 were positive with the bank recording a post tax profit of RMB 82.96 billion (US$ 12.38 billion: £ 7.6 billion), an increase of 27.48 percent compared to the same period in 2009. BoC operates in a total of five financial market segments: insurance, investment banking, corporate banking, personal banking and treasury operations, with more than 10,000 domestic and international branches. In 2009, Standard Life announced that the China Insurance Regulatory Commission (CIRC) were in the final stages of accepting the new business venture in China. Since last year, commercial details have been worked out between all parties to ensure all requirements set by the Chinese Regulators are met, which will transform HASL to a domestic insurance company. Currently, HASL is restricted in the insurance business it can write because of its status as an international insurance company in China. China has one the fastest growing life insurance markets in the world and the proposed joint venture between Standard Life and BoC will benefit from BoC's extensive distribution network, enabling improved market penetration and full advantage to be taken of the prosperous Chinese economy. Recently Standard Life released its third quarter's earnings for 2010, reporting that the group continues its trend of strong growth in assets and net inflows. Group assets under administrations (AUA) were up by 13 percent to £192.4 billion (US$3.1 billion), giving the Standard Life Group profits of £7.2 billion (US$ 11.5 billion) for the first nine months of the year. The scope of the nascent domestic Chinese life and non-life insurance industry offers global insurers huge potential for international growth. If Standard Life's joint venture with BoC comes to fruition, it will mean that HASL will no longer be restricted in the business it can write. It will also facilitate an increase in the distribution network across China and improve its competitiveness in a market which has seen more global insurers gaining access over recent years. Part of Standard Life Group's corporate strategy for future global growth is the building of stronger strategic positions in the two Asian powerhouses - China and India - through joint ventures to create more opportunities as global shifts in financial markets occur and demands for insurance products increase. The potential new joint venture between Standard Life and BoC will be critical for the Standard Life Group's global growth. Companies Mentioned: Standard Life plc. Standard Life was established in 1825 and headquartered in Edinburgh, Scotland. Since its beginnings, Standard Life has expanded into a financial services company offering pensions, life assurance, and investment management to over 6.5 million customers around the globe. Heng An Standard Life Heng An Standard Life (HASL) is a Chinese Joint Venture between Standard Life and TEDA Investment Holding Corporation and was launched in the Chinese city of Tianjin in 2004. HASL provides health, education, pension, group and bank insurance. Bank of China Bank of China Group Insurance Company Limited was established in July 1992. It mainly underwrites general insurance business and provides professional services and comprehensive coverage to customers. Since its establishment, the Company strives to achieve 'Service Excellence, Product Diversification, Accountability and Customer Satisfaction' by making effort in developing sources of business, implementing risk management, and adjusting effective marketing strategies. The Company has been in the forefront in the Hong Kong general insurance market for over 10 years.