Posted on Mar 01, 2011 by Sergio Ulloa
Zurich Financial Services has announced that a reduction in its stake of the Chinese insurance venture with New China Life Insurance (NCI) from 20 percent to 15 percent after it agreed to sell 5 percent of its holdings to an undisclosed buyer.
Zurich valued its interest in the Chinese life insurer at approximately US$1 billion when it released its annual results for 2010 in February this year. Zurich said the sale of its 5 percent stake in NCI was achieved at a level just above the respective book value at 31st December 2010. The sale is expected to be completed within the second quarter of 2011.
Martin Senn, Zurich's CEO, said: "Our decision to sell 5 percent points of our stake in NCI reflects a desire to manage our financial exposure to a business we do not control while retaining our belief that China's fast-growing insurance sector represents a highly attractive investment opportunity for Zurich."
Following the sale of the 5 percent stake in NCI, Zurich emphasized that it remains committed to the Chinese insurance market, both through the venture with NCI, and the development of interests under its own branding. Zurich recognized the Chinese government's enthusiasm for expansion of the insurance industry in China, and sees massive potential for future growth of the insurance sector in the country. The Swiss insurer originally bought into NCI in 2000 and last year said it would invest a further US$420 million in the Chinese insurer to maintain its 20 percent stake, after NCI issued a rights offer to investors.
In 2010, NCI's gross written premiums amounted to US$13.8 billion and held approximately 9 percent of the Chinese life insurance market according to the China Insurance Regulatory Commission (CIRC).
The news follows an announcement made in February 2011 that Zurich had agreed a partnership deal with Banco Santander SA (Santander)
, which provides the Swiss insurer access to the growing Latin American insurance market. The venture between the two parties means Zurich gets the use of Satander distribution channels in Brazil, Mexico, Chile, Argentina and Uruguay creating a platform for Zurich to exploit its life, pension and general insurance products.
Zurich's operating profit totaled US$4.9 billion for the year ending 31st December 2010, reflecting the insurer's strong performance over the year. In addition to announcing a healthy profit for 2010, the Swiss insurer strengthened its presence on the global stage by investing in emerging insurance markets acquiring the Middle Eastern based company - Compagnie Libanaise D'Assurances (CLA
) - together with a 20 percent stake in PT Mayapada Life of Indonesia
. The acquisitions provide Zurich with direct access to emerging markets, which are generating a substantial increase in demand for saving and protection products.
As multi-national insurers reposition activities to meet challenges and opportunities in the world insurance markets, Zurich's acquisitions in the Middle East and Indonesia, together with the venture through Santander to establish a trading platform for entry to the emerging markets in Latin America, mean that Zurich is well placed to enhance business growth in 2011 augmenting its substantial interests in established western hemisphere countries and the Asia-Pacific region.
Insurance Companies mentioned:
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries and offices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
New China Life
New China Life Insurance Co.,Ltd (NCI?has headquarters in Beijing and was established in 1996 It is a large national insurance company, with products including traditional protection products, bonus products as well as the products that have a strong financial management function. With sustained, healthy and harmonious development of the company, the brand value of NCI is a valuable asset.