Across The Border | Chinese firms remain keen to invest in insurance targets
Moody’s report says outbound M&A deals by Chinese companies were worth US$6.6 billion in 2015, and have reached US$10.2 billion in 2016 so far
The acquisitive appetite of China’s companies by overseas insurance companies will remain strong, despite rising uncertainty and volatile market conditions, according to analysts.
But the risks of taking on the business might be high, given both insurance sector players and non-insurers are likely to join the bidders, analysts say.
Sally Yim, a senior analyst with rating agency Moody’s, said outbound insurance M&A deals by Chinese companies were worth US$6.6 billion in 2015, and have reached US$10.2 billion in 2016 so far, indicating support is stronger from non-insurance acquirers than sector players.
“Insurance is quite a specialised and long-term business with extensive capital requirements. Some non-insurance corporates may not fully understand these concepts,” said Yim.
“This may lead to conflict between management teams down the line, in terms of return levels and the need for capital injection to support the soundness and growth of the insurance operations,” she said.
The latest major insurance sector deal led by a Chinese company was announced in late October, when Genworth Financial Inc, a dominant carrier in US long-term-care insurance sector, agreed to sell to China Oceanwide Holdings Group Co, for US$2.7 billion.