Mergers & Acquisitions

UCF Capital buys Hong Kong Life as Chinese funds rush into city’s insurers

The HK$7.1 billion takeover of Hong Kong Life boost share price of Asia Financial, Chong Hing Bank

PUBLISHED : Tuesday, 21 March, 2017, 3:06pm
UPDATED : Tuesday, 21 March, 2017, 10:37pm

UCF Capital Ltd., a financial group based in Hong Kong and Beijing, is among the consortium of buyers behind the HK$7.1 billion (US$910 million) purchase of Hong Kong Life, the city’s 10th largest life insurer, according to two sources familiar with the deal.

The Chinese company, whose businesses include financial technology, online wealth management, payments, health care and real estate, plans to combine its fintech expertise with Hong Kong Life’s insurance business, the sources told the South China Morning Post, declining to be named. The buyer intends to maintain the existing management of Hong Kong Life, they said.

UCF is the latest example of mainland Chinese capital that’s flooding into Hong Kong in search of land parcels, insurers and prime real estate as hedges for the renminbi’s 7 per cent deterioration against the US dollar.

Yuan makes beeline for the exit into HK’s insurance policies

Mainland Chinese individuals have also been pouring money into Hong Kong’s insurance policies, spending HK$48.9 billion during the first nine months of 2016, more than double the same period a year earlier. Up to 37 per cent of all insurance policies sold in Hong Kong were to mainland Chinese policy holders, up from 21.7 per cent in 2015.

The rush by mainland capital into Hong Kong’s insurance policies and insurance companies “has bolstered the total sales of insurance products in the city,” said Chan Kin-por, the lawmaker for the industry. This has benefited many Hong Kong insurance companies and attracted many new investors to the Hong Kong market.”

The flood of funds by ordinary Chinese policy holders have made insurers ripe for picking by mainland asset traders and corporate acquirers. There were eight takeovers of Hong Kong insurers last year by overseas and Chinese companies in 2016, up from six in 2015 and three in 2014, according to Thomson Reuters’ data.

Hong Kong insurers brace as they become acquisition targets

JD Capital, also known as Beijing Tongchuang Jiuding Investment Management, agreed to pay HK$10.7 billion in August 2015 to buy Ageas, which was since renamed to FTLife Insurance Company.

Fujian Thai Hot Investment agreed to pay HK$10.6 billion last June to buy Dah Sing Financial Holdings’ life insurance business, in the industry’s biggest acquisition last year.

Hong Kong Life was founded in 2001 by five local financial firms. Shares of two of the listed owners rose in Tuesday trading after their disposal was announced.

Asia Financial Holdings and Chong Hing Bank will each receive HK$1.18 billion from selling their Hong Kong Life stakes, and will each report an unaudited gain of HK$1.09 billion.

Asia Financial rose as much as 12 per cent, their biggest intraday jump since April 2015, to HK$4.54 in Hong Kong. Chong Hing rose 3 per cent to HK$17.44, the highest intraday level since September 2015. Other sellers of the insurer were OCBC Wing Hang Bank, Shanghai Commercial Bank and Wing Lung Agency. The buyer of Hong Kong Life is a consortium known as First Origin, of which UCF is a member.

UCF was founded in 2003, according to its website. Among its businesses is Hong Kong-listed Credit China Fintech Holdings, which provides Internet finance services to as many as 32 million customers with 800 billion yuan of transactions last year.

The company has two investment arms: Holder Capital and UCF Capital. Holder invests in insurance, securities and financial services, holding stakes in companies including Haitong Securities and China Everbright Bank. UCF Capital invests in car rental services, holiday resorts and the aviation industry, according to the company’s website.