Insurance – and particularly life insurance – has become one of Asia’s hotbeds for M&A activity. Here are just some of the deals or bids reported in the last month or so alone:
- The biggest – and as yet unresolved – bid is the unsolicited A$11bn ($10.2bn) bid by Axa and Australia’s AMP on November 9 for Axa’s majority-owned Asian business, Axa Asia-Pacific Holdings. As the FT reported, the bid, which was rejected by APH as inadequate, signalled the French company’s intent to expand its presence in some of the world’s fastest-growing emerging markets. It marked the second time in five years that it has tried to buy the Asian business outright.
- On Wednesday, Chinatrust said it plans to pay $660m for a 30% stake in Nan Shan Life, Taiwan’s second-largest life insurer, after losing its bid to buy the business from AIG, reports Bloomberg. Chinatrust, Taiwan’s third-biggest financial company by market value, said it will acquire the 30% investment from China Strategic Holdings, which together with Primus Financial agreed last month to buy Nan Shan for $2.15bn.
- Earlier this week, AMP, Australia’s biggest provider of pension plans, said it had entered into a partnership with China Life Insurance to co-operate in areas including asset management and pensions. As Bloomberg reported, the agreement with China’s biggest insurer offers significant potential for AMP to expand its business in the world’s fastest-growing economy.
- Meanwhile, Temasek is reported to have offered $1.2bn for French insurer Axa’s 15.6 per cent stake in Taikang Life, China’s fourth-largest insurer, after the FT reported that bidders including buy-out firms KKR and Blackstone expressed interest in early November in the minority stake, which offers exposure to China’s fast-growing life insurance sector.
- And late last month, the FT reported that UK insurer Prudential is considering a separate listing in Hong Kong or Shanghai in a move that could raise capital and underline its regional ambitions. After seeing strong demand for a $750m hybrid capital raising in Asia this year, Prudential was conducting a preliminary assessment of the likely benefits of listing on either bourse, the report added.
- Also in late October, China Great Wall Asset Management, one of the “bad banks” set up a decade ago to clean up non-performing loans in the Chinese banking system, established a life assurance joint venture with Nippon Life Insurance, Japan’s largest life assurer by assets, highlighting a strategy of diversification by Great Wall and the other three state-owned bad banks.
So why all the activity?As the FT noted in June: international expansion is high on the agenda of many companies, particularly into the big emerging markets — Brazil, Russia, India and China — and Asia generally.
That, at least, was the finding in two global surveys cited in the report, one by KPMG and the Economist Intelligence Unit, and the other by Accenture – both of which concluded that large insurers will be paying far more attention to Asia’s markets in future. In terms of China’s nascent life assurance market, the FT explains in a recent report:
China’s ever-growing market for life assurance is already the world’s seventh largest by premium income despite penetration rates of only 2 per cent. PwC predicts that annual premium income in life assurance in China will double over the next three years, and so offer fresh growth opportunities for foreign participants.At present, joint ventures have a combined 5 per cent share of the local life assurance market, which is dominated by powerful domestic competitors led by China Life. However, the dynamics of the market are changing as Chinese banks are allowed greater participation in the sector and some foreign insurers… ponder whether they can deploy extra growth capital to their mainland ventures.Joint ventures in which the foreign partner owns a stake of more than 25 per cent are not classified as domestic insurance companies, thereby restricting their geographic footprint and product offering. Several foreign groups that own more than 25 per cent of their venture have announced or are considering selling part of their holding to domestic banks, which typically boast huge nationwide distribution capability.Some foreign life insurers that entered joint ventures in China in the hope of tapping a high-growth market have consistently lost money and seen market share dwindle – due partly to the lack of distribution channels and insufficient understanding of the domestic market.
Even so, as many other insurers conclude, the rewards in the long run may well be worth the slog to get there.
Related links:
Axa vs APH – Lex
Axa gets bullish and busy on acquisitions – FT