Mergers & Acquisitions

Hong Kong Life leverages combined resources of partners to compete with larger rivals

PUBLISHED : Friday, 23 September, 2016, 7:15pm
UPDATED : Friday, 23 September, 2016, 10:25pm

Hong Kong Life, a joint venture life insurance company owned by five financial firms, is drawing particular takeover interest thanks to its business portfolio and bank branch network. Its corporate history can also illustrate how a group of smaller lenders can join hands to compete with bigger players.

Asia Financial Holdings president Bernard Chan pioneered the trend, calling upon 10 banks including his own to set up Bank Consortium Trust (BCT) in 1999 to introduce a Mandatory Provident Fund business when the pension scheme launched in 2000.

“That was sort of a defensive move for the 10 banks to get together to form the BCT Group to do MPF business. We knew our banking customers would need the MPF services and we had to provide the services for them. But then, each of us was too small to have the scale to do the business which is why we needed to get together,” he said.

The shareholder group initially comprised 10 banks but later consolidated to become eight. The current shareholders include Chan’s Asia Financial, Chong Hing Bank, Dah Sing Bank, Fubon Bank, ICBC (Asia), OCBC Wing Hang, Shanghai Commercial Bank and Wing Lung Bank.

BCT is now the sixth largest MPF provider in the city with a 6 per cent market share.

“By combining together, we have more than 330 branches in Hong Kong and we can share our back office for administration,” he said.

“When BCT was set up, it was right at the launch of the MPF, such that it was competing with all other MPF providers in a new market,” he said.

In the next evolutionary step, six financial firms joined hands to form Hong Kong Life in 2001. It now has five shareholders, including Asia Insurance which is the flagship company of Asia Financial, Chong Hing Bank, OCBC Wing Hang, Wing Lung Bank and Shanghai Commercial Bank.

We will need to think if we should continue the alliance, or if we should cash in when an appropriate buyer arrives
Bernard Chan, president, Asia Financial

Hong Kong Life has a tough battle to fight, Chan said, as many rival life insurance companies in Hong Kong have large teams of insurance agents or bigger branch networks and customer pools to sell their products.

“We expected the life insurance business would be tough. But still, it is better for us to form this bank joint venture to sell products than to do it alone,” he said.

Fifteen years on, he said three of the original six shareholders have changed hands while two have combined into one.

“We will need to think if we should continue the alliance, or if we should cash in when an appropriate buyer arrives,” he said.

Recent deals have shown that Hong Kong insurers can be sold for good money with Dah Sing Banking Group offloading its life insurance operation for HK$10.6 billion.

Hong Kong Life has appointed Goldman Sachs and Nomura as financial advisers to review what is in the best interests for its shareholders.

“We have not made a final decision on whether to sell or not. But overall, we believe the financial alliance has been a successful experience as that is how smaller players can achieve the scale to compete with the bigger players,” Chan said.