
Mar
30
Chinatrust Financial Seal MetLife Taiwan Deal
Posted on Mar 30, 2011 by Sergio Ulloa (G+)
Chinatrust Financial Co. Ltd, Taiwan's third-largest financial services provider by assets, has agreed to purchase US-based MetLife Inc's Taiwanese life insurance unit for US$180 million. With the acquisition of MetLife Taiwan, Chinatrust will finally be able to enter the life insurance market it has long coveted. The ownership transfer deal, which is pending approval of the Insurance Bureau under Taiwan's Financial Supervisory Commission, will be wholly financed by Chinatrust Financial. The company has been attempting to both internationalize, and diversify its financial products, and build a strong platform in the insurance sector. Chinatrust Financial had competed for every foreign life insurance unit put up for sale in recent years, pursuing every opportunity to enter the local market. The company's most recent bid attempt resulted in a failure to buy Nan Shan Life Insurance, the Taiwanese branch of AIG, in January. Chinatrust Financial has already experienced success in the bank insurance sector in Taiwan, becoming a domestic industry leader through its subsidiary Chinatrust Commercial Bank. The bank generated premium revenue of over NT$100 billion (US$3.4 billion) for two consecutive years through its bancassurance business platform; with profits exceeding NT$16 billion (US$ 542 million) for 2010. The addition of MetLife will expand Chinatrust's capacity to sell insurance, and diversify their revenue sources. Speaking at an evening press conference, Chinatrust Financial company president ,Daniel Wu, said of the upcoming purchase of MetLife Taiwan: "This will not just be a simple financial investment, but a strategic investment," he added "the group wanted to purchase a life insurance unit so it could tap into the local market and use it as springboard into the Chinese market." Chinatrust Financial has promised to retain MetLife Taiwan's 624 domestic employees, and fully guarantee the rights of the company's 307,000 preexisting policy holders. Chinatrust are prepared to pool resources from the company's other financial services subsidiaries to help make inroads into the lucrative mainland China insurance market. President Wu said he planned to increase Metlife Taiwan's assets up to NT$500 billion (US$ 16.7 billion) from less than the NT$100 billion (US$3.4 billion) at present. MetLife Taiwan, founded in 1989, is the fourth largest foreign life insurance company in Taiwan by gross premium, totaling NT$14billion (US$ 480 million) in gross premiums for 2010. MetLife management, however, has been looking to divest itself from its Taiwanese branch due to limited growth prospects, and an unprofitable local investment environment. MetLife's regional managing director, Peter Smyth, explained: "The scope of business prospects for MetLife Taiwan is limited due to the absence of its own distribution channel," adding, "that is not a concern with a domestic financial group, however." This was Metlife's second attempt at offloading their Taiwan unit. In April 2010, the company had agreed a deal with Waterland Financial Holdings Co, a smaller financial conglomerate, to purchase Metlife Taiwan for about US$ 112 million. The move was struck down by Taiwanese financial regulators in October, citing concerns over Waterland's financial and management capacity to run the life insurer after the acquisition. Metlife has become the latest major multinational investment company to sell its stake, or a significant share of its assets, in Taiwan's US$ 52 billion insurance market. The forecast for Taiwanese business has remained slow-moving in the aftermath of the global economic crisis, and the market has been inhibited by historic business secured at base interest rates which are no longer sustainable. New international accounting rules that increase capital requirements for insurers, coupled with strict local regulators and general market volatility, have led many international firms to question their continued presence in the country. All of this is occurring at a time when profits, and business opportunity, return in regional neighbors such as, Japan, Thailand and particularly China. Prudential, Aegon and the ING Group all have retreated from Taiwan, usually selling to local financial services companies who are looking to diversify into insurance. Following the 2008 economic crisis, ING agreed to sell its life insurance business to Fubon Financial Holdings for US$ 600 million, Aegon followed suit for only $65 million a year later. China Life acquired Prudential's Taiwanese branch in 2009. In addition, MassMutual International Holdings Inc. sold its 39 percent stake in joint venture MassMutual Mercuries Life Insurance Co and even more recently AIG, after a protracted bidding war, sold Nan Shan Life Insurance to Taiwan-based Ruen Chen Investment Holdings Co. Both New York Life Insurance and Aviva PLC are thought to be considering their exits from the island country as well. Merger and acquisition activity throughout the rest of Asia is set to maintain significant growth in 2011 due to stronger investor confidence in the market. Insurance business growth in Asia is expected to outperform that of other more mature markets, with Vietnam, Indonesia and China leading the way. Insurance Companies Mentioned: Chinatrust Financial





