Axa adds momentum to China’s changing financial landscape

Marking a further blurring of the
boundary between Chinese banks and insurers, the country’s largest
bank Industrial and Commercial Bank of China (ICBC) is to acquire a
60% stake in life insurer Axa-Minmetals Assurance Company (AMAC).
This will be from Axa, Axa Asia Pacific and Chinese metals and
mineral trading company Minmetals.

The deal is worth about CNY1.2bn
($180m). On completion of the deal, Axa’s direct stake in AMAC will
fall from 26% to 14%, Axa Asia Pacific’s from 25% to 13.5%, and
China Minmetals’ from 49% to 12.5%. Axa has a 54% stake in Axa Asia
Pacific.

AMAC, which will be renamed
ICBC-Axa Life, was established in 1999 by Axa, Axa Asia Pacific and
China Minmetals, a metals and minerals trading company. According
to the China Insurance Regulatory Commission, in the first eight
months of 2010, Axa-Minmetals’ premium income increased by 56%,
compared with the same period in 2009, to CNY716m. This ranked AMAC
a distant 15th among 28 foreign insurers in China, which have a
combined market share of about 5%.

ICBC’s move was facilitated by an
easing of regulations relating to cross holdings between Chinese
banks and insurers. In June 2010, China’s second largest life
insurer Ping An announced that it was to increase its stake in
Shenzhen Development Bank (SDB) to 51%, in a deal worth
CNY29bn.

Of the total consideration,
CNY2.7bn is in cash with the balance being contributed by the
merger of Ping An’s 90.75%-owned Ping An Bank with SDB. Ping An
acquired a 30% stake in SDB in September 2009.

Axa’s reduced exposure to China
also continues a recent trend among foreign insurers. In September
2009, Canadian insurer Sun Life Financial announced that it would
cut its stake in Sun Life Everbright Life from 50% to 20%. Sun Life
and its partner in the venture, state-owned conglomerate China
Everbright Group, agreed to introduce new strategic investors to
Sun Life Everbright, a move intended to double its capital to
CNY3bn.

Also in September 2009, UK insurer Standard Life announced that
Bank of China (BoC) was to acquire control of its 50:50 joint
venture with its Chinese partner Teda International, Heng An
Standard Life (HASL). BoC acquired 50% of HASL with Standard Life
and Teda contributing equal portions of their takes.

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