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The foreign investors are showing bigger and bigger interest in the third-echelon insurance companies in China.
Foreign insurance giants have changed their strategies of exploring Chinese market. They are no longer satisfied with establishing joint ventures in China. Purchasing stocks from China’s third-echelon insurance companies as strategic investors has become a new trend.
Yesterday’s Joint Venture Partners Today’s Strategic Investors
China’s insurances companies can be divided into three echelons according to market share and premium income. Major members of the first echelon are China Life Insurance, Ping An Insurance, New China Life Insurance, Taikang Life Insurance and China Pacific Life Insurance. The representatives of the second echelon are Taiping Life, Life Insurance, Minsheng Life Insurance and Union Life Insurance and the third echelon are Jiahe Life Insurance, Dragon Life Insurance, Huaxia Life Insurance, Sinatay Life Insurance and Yingda Life Insurance, whose market share and premium income is much less than that of the first two echelons.
Although Canadian Sun Life Finance Services, British Standard Life Assurance, American New York Life Insurance and Canadian Manulife Financial successively reduced stocks or even disinvest in China, many foreign insurance companies still covet Chinese market.
On April 7th, 2010, the Chinese Insurance Regulatory Commission approved Sinatay Life Insurance’s 45.85 shares of directional add-issued common stock to Mitsui Sumitomo Insurance, which makes Mitsui Sumitomo the first overseas shareholder of Sinatay. Unlike other overseas insurance companies, Mitsui Sumitomo focuses on the third echelon of Chinese life insurance companies.
Only one decade ago, many foreign insurance companies racked their brains to establish joint ventures with Chinese companies. Now they prefer to make strategic investments in Chinese insurance market.
Last June, American MassMutual invested in Chinese State-owned insurance company, Yingda Life Insurance, and obtained 19.9% of its shares.
A chief Representative of a foreign enterprise told reporter that, European and American insurance companies originally believed they could take the majority of Chinese market share as long as China opens up its market. But to their surprise, their former experience is not enough to achieve this goal, and strategic investment may be a preferable choice.
The Third-Echelon Promises Greater Investment Space
Although the market share and premium income of the third-echelon insurance companies can not compare with that of the first two echelons, the threshold of market access is relatively lower. Hongkong and Shanghai Banking Corp. (HSBC) once spent 5billion RMB purchasing the equity of China Ping An Insurance gaining 6 times premium per share. Italian Eurizon Financial Group spent 860 million RMB purchasing the stocks of Union Life Insurance gaining 6.5 times premium per share. Compared with these two foreign investors, Sumitomo Mitsui Financial Group keeps a relatively low profile, who only spent 100 million purchasing 45.85 million shares of Sinatay Life Insurance.
Chen Li of Honglixin Capital, a private equity fund, analyzed the law of overseas companies making strategic investments. He told the reporter, the main reason of Sumitomo Mitsui Financial Group choosing Sinatay is that, Sinatay is a local invested insurance company, with its headquarter in Hangzhou, Zhejiang Province, the most developed region in China. The threshold of access for Sumitomo Mitsui Financial Group is not high, doubled price per share. While Massachusetts Mutual Life Insurance Company strategically invested in Yingda Taihe Insurance Company with the purpose of utilizing the great network, group insurance clients base and premium potential of China State Grid.
Sinatay Life Insurance was established in May, 2007, whose major shareholders are Zhejiang local enterprises, such as Juhua Group Corporation, Zhejiang Yongli and so on. Sinatay’s original premium income of the first quarter is about 0.7 billion, with a 112% year-on-year rise, which is higher than the average growth. Sinatay has set 8 provincial branches in Zhejiang, Jiangsu, Shandong, Beijing and so on. If foreign investments intend to establish joint ventures in China, it will take 5 years for them to reach the scale of Sinatay.
Foreign insurance giants have changed their strategies of exploring Chinese market. They are no longer satisfied with establishing joint ventures in China. Purchasing stocks from China’s third-echelon insurance companies as strategic investors has become a new trend.
Yesterday’s Joint Venture Partners Today’s Strategic Investors
China’s insurances companies can be divided into three echelons according to market share and premium income. Major members of the first echelon are China Life Insurance, Ping An Insurance, New China Life Insurance, Taikang Life Insurance and China Pacific Life Insurance. The representatives of the second echelon are Taiping Life, Life Insurance, Minsheng Life Insurance and Union Life Insurance and the third echelon are Jiahe Life Insurance, Dragon Life Insurance, Huaxia Life Insurance, Sinatay Life Insurance and Yingda Life Insurance, whose market share and premium income is much less than that of the first two echelons.
Although Canadian Sun Life Finance Services, British Standard Life Assurance, American New York Life Insurance and Canadian Manulife Financial successively reduced stocks or even disinvest in China, many foreign insurance companies still covet Chinese market.
On April 7th, 2010, the Chinese Insurance Regulatory Commission approved Sinatay Life Insurance’s 45.85 shares of directional add-issued common stock to Mitsui Sumitomo Insurance, which makes Mitsui Sumitomo the first overseas shareholder of Sinatay. Unlike other overseas insurance companies, Mitsui Sumitomo focuses on the third echelon of Chinese life insurance companies.
Only one decade ago, many foreign insurance companies racked their brains to establish joint ventures with Chinese companies. Now they prefer to make strategic investments in Chinese insurance market.
Last June, American MassMutual invested in Chinese State-owned insurance company, Yingda Life Insurance, and obtained 19.9% of its shares.
A chief Representative of a foreign enterprise told reporter that, European and American insurance companies originally believed they could take the majority of Chinese market share as long as China opens up its market. But to their surprise, their former experience is not enough to achieve this goal, and strategic investment may be a preferable choice.
The Third-Echelon Promises Greater Investment Space
Although the market share and premium income of the third-echelon insurance companies can not compare with that of the first two echelons, the threshold of market access is relatively lower. Hongkong and Shanghai Banking Corp. (HSBC) once spent 5billion RMB purchasing the equity of China Ping An Insurance gaining 6 times premium per share. Italian Eurizon Financial Group spent 860 million RMB purchasing the stocks of Union Life Insurance gaining 6.5 times premium per share. Compared with these two foreign investors, Sumitomo Mitsui Financial Group keeps a relatively low profile, who only spent 100 million purchasing 45.85 million shares of Sinatay Life Insurance.
Chen Li of Honglixin Capital, a private equity fund, analyzed the law of overseas companies making strategic investments. He told the reporter, the main reason of Sumitomo Mitsui Financial Group choosing Sinatay is that, Sinatay is a local invested insurance company, with its headquarter in Hangzhou, Zhejiang Province, the most developed region in China. The threshold of access for Sumitomo Mitsui Financial Group is not high, doubled price per share. While Massachusetts Mutual Life Insurance Company strategically invested in Yingda Taihe Insurance Company with the purpose of utilizing the great network, group insurance clients base and premium potential of China State Grid.
Sinatay Life Insurance was established in May, 2007, whose major shareholders are Zhejiang local enterprises, such as Juhua Group Corporation, Zhejiang Yongli and so on. Sinatay’s original premium income of the first quarter is about 0.7 billion, with a 112% year-on-year rise, which is higher than the average growth. Sinatay has set 8 provincial branches in Zhejiang, Jiangsu, Shandong, Beijing and so on. If foreign investments intend to establish joint ventures in China, it will take 5 years for them to reach the scale of Sinatay.