China’s giant insurers into global markets
In a deal that heralds the arrival of China’s giant insurers in
Western insurance markets, Ping An, China’s second-largest life
insurer, has bought a 4.18 percent strategic stake in Belgian-Dutch
bancassurer Fortis.
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The investment, made via the purchase of shares in the
secondary market, makes Ping An Fortis’s largest shareholder and,
based on Fortis’s market capitalisation of about €48.5 billion ($71
billion), its stake worth €2 billion.
“The investment is a major milestone for China’s insurance
industry,” said Ping An’s chairman and CEO, Peter MA Mingzhe. “Our
decision to invest in Fortis reflects our strong belief in and
support for their strategy, and will improve Ping An’s
competitiveness and allow it to achieve a faster rate of
sustainable growth.”
For Fortis, the investment by Ping An represents a significant
boost to its expansion drive, which is aimed at generating at least
30 percent of net profit outside the Netherlands and Belgium by
2009.
The investment by Ping An “will raise Fortis’s profile in China,
which, combined with an expected increased access to the Chinese
market, will lift our overall growth potential”, said Fortis’s
chairman, Maurice Lippens.
Given the scale of Ping An’s involvement in China’s insurance
industry, Lippens’s optimism is understandable. According to Ping
An, it has about 244,000 life insurance sales agents, more than
3,000 branch offices nationwide and, as at 30 June, 39.75 million
retail customers and 1.95 million corporate customers.
Ping An’s major operating units include Ping An Life, which in the
first ten months of 2007 generated total premium income of RMB65.19
billion ($8.8 billion), giving it a market share of about 16
percent. The group’s general insurance unit, Ping An Property &
Casualty, generated premium income of RMB17.92 billion, ranking it
third. Ping An’s total assets, as at 31 October, stood at RMB624
billion, while its market capitalisation was $127 billion.
The alliance between Fortis and Ping An will be strengthened by the
appointment of Ping An’s executive director and group president,
Louis Cheung, to Fortis’s board of directors.
His appointment is subject to approval by a general shareholders’
meeting. Fortis’s existing presence in China is focused on
bancassurance, asset management and merchant, commercial and
private banking. Its presence has been developed through joint
ventures (JV) with Taiping Life Insurance (China’s sixth-largest
life insurer) and Fortis Haitong Investment Management, which, as
at 30 June 2007, had total assets under management of €5 billion.
These JVs will not be affected by Ping An’s investment, noted
Fortis.
Ping An’s purchase of a stake in a major foreign insurer appears
likely to be followed by similar moves from other Chinese insurers.
According to China’s state news agency, Xinhua, the China Insurance
Regulatory Commission fully supported Ping An’s investment in
Fortis and is encouraging other insurers to follow a similar
strategy.
The scale of deals by Chinese financial groups also appears
to be rising. Notably, in the largest foreign purchase by a Chinese
bank, Industrial and Commercial Bank of China (ICBC), the country’s
largest commercial bank, is to acquire a 20 percent stake in
Standard Bank of South Africa (SBSA) for approximately $5.5
billion.
In addition to banking interests, SBSA is the controlling
shareholder of South Africa’s third- largest life insurer Liberty
Life, in which it has an indirect 30.5 percent controlling stake
via Liberty Life’s holding company.
