Sun Life buys CMG Asia in $3.5b deal
Canadian firm's purchase marks biggest takeover in HK life insurance sector
Sun Life Financial, Canada's largest life insurer, will buy CMG Asia and sister firm CommServe Financial for $3.5 billion in cash, in what could mark the beginning of a long-overdue consolidation in Hong Kong's profitable but crowded insurance sector.
The deal, signed yesterday, calls for Sun Life to buy all the assets of the two firms from the Commonwealth Bank of Australia this quarter.
The deal is Hong Kong's largest life insurance takeover. The enlarged company will be the city's seventh-largest life insurer by premium revenue.
Geoffrey Saggers, the chief executive of Sun Life Financial (Hong Kong), said the company would consider seeking a listing on the stock exchange.
'It would enhance our profile and public awareness, but we have not made a final decision yet,' Mr Saggers said yesterday.
Sun Life already trades on the Toronto, New York and Manila stock exchanges.
Sun Life has been operating in Hong Kong since 1892 and has a Tianjin-based mainland joint venture with China Everbright but still ranked 19th among 44 life insurance firms in the territory last year, according to company data.
CMG ranked eighth in 2003, according to the Office of the Commissioner of Insurance.
'Sun Life is very big in Canada and other Asian markets but we only have a small operation in Hong Kong,' Mr Saggers said. 'We have mainly been doing individual life business while CMG has medical, group life and pension businesses. It is a perfect match of our business lines.'
Sun Life's local agent force would increase to 1,700 from 500 and its customer base would swell to 350,000 from 100,000, he said.
The acquisition will also bring Sun Life into the lucrative Mandatory Provident Fund (MPF) trustee business, of which CMG controls a 10 per cent share.
A spokesman from the MPF authority said a licence transfer would need approval but it was too early for official comment on the deal.
Industry sources said Commonwealth Bank, which wants to focus on its banking and asset management businesses, had been looking to sell CMG for a number of years.
On completion of the deal, the CMG and CommServe identities will be scrapped and all business conducted as Sun Life Financial. CMG's office in Tsim Sha Tsui will be retained, as will Sun Life's offices in Pacific Place and Exchange Square.
Mr Saggers will be the chief executive of the enlarged company and CMG agency head Julia Wong will lead the combined sales team.
CMG recently signed an agreement with Cinergy, an agency run by 'insurance godfather' Andrew Yang Fang-shing, under which Mr Yang's 180's agents will sell CMG policies.
Mr Saggers said the acquisition would not affect this arrangement. Standard & Poor's yesterday retained CMG's BBB-plus ratings for insurer financial strength and counterparty credit ratings, placing it on credit watch with 'positive implications' in light of the deal.
New York Life Insurance plans to double its Hong Kong profits to US$7.2 million this year.
Hong Kong company president and chief executive Jeff Walker said it would expand its sales force by 30 per cent.
'Hong Kong's insurance market has a lot of room to grow,' Mr Walker said.