China Life to acquire 60pc of pension manager
China Life Insurance has agreed to buy a majority stake in pension manager China Credit Trust, a sign that the nation's cash-rich insurers will use their growing financial muscle to expand into new business, a state-owned newspaper said.
China Life would pay 3.6 billion yuan for a 60 per cent stake in Beijing-based China Credit if approved by the Ministry of Finance, the state-run China Daily reported yesterday, citing an unnamed source.
China Life's Shanghai-listed shares rose 4.73 per cent to 49.20 yuan on the report but its Hong Kong-listed shares fell 1.13 per cent to HK$30.55.
The acquisition would allow China Life to tap the mainland's growing corporate annuity business - private pension policies set up by companies for retired workers - which is expected to expand from US$11.8 billion at the end of last year to US$1.8 trillion by 2030, according to the World Bank's forecasts.
It is also further evidence of the company's intent to open up new business channels and diversify from traditional property and life insurance policies.
'For China Life 3.6 billion yuan is a pretty small sum. It continues the strategic investment and diversification theme they have been following for the past couple of years,' said Chris Esson, an insurance analyst at Macquarie Securities.
The nation's biggest insurance group bought a 20 per cent stake in Guangdong Development Bank for 5.67 billion yuan last year and paid 5.45 billion yuan last month to become the largest shareholder of China Minsheng Bank.
The mainland insurance industry is in a period of flux as banks and insurers begin to compete for the same businesses.
Moreover, the financial regulators constantly tweak the system, adding to the instability.
Mainland insurance companies, which have ridden the stock market wave over the past 15 months, control 2.53 trillion yuan worth of assets, up 426.4 billion yuan since the start of the year, according to first-half figures released by the insurance regulator. Premiums rose 20.7 per cent from a year ago to 371.8 billion yuan.
On Tuesday, the China Insurance Regulatory Commission doubled insurance companies' quota for investing directly in stocks to 10 per cent of total assets but decreased the investment quota in mutual funds from 15 per cent to 10 per cent.
It is also opening up the stock market to small- and medium-sized insurers who need a special licence to invest in equities.
So far, the commission has given permission to 11 small- and medium-sized insurers to trade A shares, the China Business News further reported. Bohai Property Insurance and the China Huanong Property & Casualty Insurance are to be added to the list.
