Posted on Dec 01, 2010 by Sergio Ulloa
China's third largest insurer by premium income, China Pacific Insurance (CPIC), has announced that it intends to sell its 50 percent stake in the Pacific-Antai Life Insurance Chinese joint venture company. This is a move to further restructure the Chinese insurer's operations.
The 50-50 joint venture is currently with Dutch financial company ING Group NV (ING), with CPIC looking to off-load its equal share for CNY943 million (US$142 million) as it seeks to re-position itself in the Chinese insurance industry.
The news was released on the Shanghai United Assets and Equity Exchange (SUAEE), with China Pacific - one the largest life insurers in China - aiming to sell its 50 percent stake in Pacific-Antai to a consortium lead by a bank with minimum net assets valued at CNY200 billion (US$30 billion) or more. Chinese insurers are being discouraged from bidding for competition purposes.
Although Pacific-Antai has reported robust performance figures, CPIC's decision to sell its stake in this joint venture follows rival insurer China Life's decision to sell its stake in a Joint Venture with the Commonwealth Bank of Australia (CBA) during 2009, in a bid to make their business more streamlined in an increasingly competitive market.
The China Insurance Regulatory Commission (CIRC) - the gatekeeper of the insurance sector in China - has adopted new measures and guidelines in recent times in order for the industry to maintain its competitive edge and fair trading approach. Chinese insurance rules currently state that no foreign company can hold more than a 20 percent stake in a Chinese based insurance provider.
In keeping with the regulatory reform in China, ING agreed to sell its 50 percent stake in Pacific-Antai Life Insurance to the China Construction Bank in 2009. The move was to ensure the Dutch financial firm met the CIRC trading requirements; ING acquired Pacific-Antai from Aetna in 2000. The ING sale of its stake in Pacific-Antai Life Insurance is still pending Chinese regulatory approval.
ING took the strategic discussion to focus on its 50-50 Chinese venture in Capital Life and local based partners Beijing Capital Group, with ING Capital Life forecasting strong growth potential from retirement services and educational saving product sales. ING suffered badly during the 2007-2008 global financial crises and has since adopted a back-to-basics strategy, with the Dutch group committing to ING Capital Life for long term growth within the Chinese insurance sector.
The Pacific-Antai Life Insurance Company Limited provides life insurance products and services, with a presence in Shanghai, Guangzhou, Nanhai, Shunde and Dongguan in China. Pacific-Antai Life Insurance was original established in 1998 between US-based Aetna and China Pacific Insurance, with ING taking over Aetna's Asian operation in 2000.
In 2009, Pacific-Antai Life Insurance reported a net profit of CNY142 million (US$21.3 million), compared with a net profit in 2008 of CNY77.1 million (US$11.5 million).
China has emerged from the worldwide financial crisis in 2007-2008 as a pivotal country for global insurers seeking to gain access to and establish a position in the most populous country and second largest economy in the world. Major players within the Chinese insurance industry include companies such China Life Insurance and Ping An Life, but all participants in the insurance industry have faced increased competition in recent years as local and multinational insurers strengthen their reach in the country.
Current multinational Chinese insurance company joint ventures notably include the Sun Life Everbright partnership along with the Aviva-Cofco. Other major foreign insurers with partnering agreements include Zurich and Generali, with links involving New China Life Insurance (NCI) and the China National Petroleum Corporation (CNPC) respectively. PricewaterhouseCooper (PwC)
recently produced report indicating that foreign insurers are predicting a static period in their Chinese activities over the next 3 years, with increased competition by local insurers taking a stronger position in the market.
Insurance Companies Mentioned:
Pacific-Antai Life Insurance
Pacific-Antai Life Insurance Company Limited was established in 1998 between China Pacific Insurance and US-based Aetna. In 2000 the ING group took over Aetna Asian operations, and substantially Pacific-Antai Life Insurance. The company has a presence in Shanghai, Dongguan, Guangzhou, Nanhai and Shunde in China.
ING is a Dutch global financial institution which provides banking, investment, life insurance and retirement services. As from 2009, ING had more than 85 million private, corporate and institutional clients in more than 40 countries.
China Pacific Insurance
China Pacific Insurance (Group) Co., Ltd. (CPIC) was established on the basis of China Pacific Insurance Co., Ltd., which was founded on May 13, 1991. Headquartered in Shanghai, its registered capital stands at RMB 7.7 billion. The company was listed in Shanghai Stock Exchange on Dec. 25, 2007, with the stock code of 601601 and the stock name of " China Pacific". The Company was listed in the Stock Exchange of Hong Kong Limited on Dec. 23, 2009, with the stock code "02601" and the stock name of "CPIC".
China Life Insurance
China Life Insurance Company Limited (China Life) is a People's Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.