Canadian insurer Sun Life considers raising stake in joint venture as China eases foreign investment curbs

But increased shareholding in Sun Life Everbright will depend on willingness of local partners to sell, says chief executive

PUBLISHED : Monday, 02 July, 2018, 8:01am
UPDATED : Monday, 02 July, 2018, 8:01am

Sun Life Global, the 14th largest listed life insurer globally by market cap, is considering increasing its shareholding in Chinese joint venture Sun Life Everbright Life Insurance, according to chief executive Dean Connor.

We are bullish on China … Ultimately [achieving a shareholding of] 51 per cent, but even going from 25 per cent to 49 or 50 per cent would be nice
Dean Connor, chief executive, Sun Life Global

The firm, among Canada’s largest public companies, said there were a lot of opportunities for growing the insurance business in China despite intense competition. “We are bullish on China. If we could buy a larger percentage we would like to,” Connor said in an interview. “Ultimately [achieving a shareholding of] 51 per cent, but even going from 25 per cent to 49 or 50 per cent would be nice.”

As China moves to fulfil its promise of opening up its markets to foreign investors, the increased size of Sun Life’s shareholding in Sun Life Everbright will depend on the willingness of its local partners to sell, said Connor.

In 2010, Sun Life cut its shareholding in Sun Life Everbright to 25 per cent, which was repositioned to become a domestic entity so that it could obtain licences for new Chinese cities quickly, in a push for branch expansion. China Everbright Group retained a 50 per cent share, while China North Industries Group and Anshan Iron and Steel Group each acquired a 12.5 per cent stake in the life insurer.

The joint venture has since grown its footprint across the country, obtaining licences for 22 provinces and municipal cities. As a result, growth now means expansion within cities where it operates and less about getting new licences, said Connor.

China unveiled on Thursday a long-anticipated easing of foreign investment curbs in sectors ranging from agriculture to banking, as its trade dispute with the US shows no signs of receding.

The National Development and Reform Commission, China’s top economic planner, announced the cap on foreign shareholding in companies in life insurance, securities and futures joint ventures would be raised to 51 per cent from 49 per cent effective July 28, with all foreign investment restrictions being removed entirely in 2021.

China’s life insurers see fall in income as regulator crackdown bites, but e-commerce boom lifts online insurance business

The NDRC also cut the number of items on its so-called negative list, which contains industries where foreign investment is limited or prohibited, to 48 from 63.

Owning a larger part of its Chinese joint venture was part of a theme for Sun Life across its business in Asia, said Connor.

In India, the company raised its stake in Birla Sun Life Insurance to 49 per cent from 26 per cent when laws changed in 2015. In Vietnam and Indonesia, Sun Life bought out its local partners in 2016, raising its equity to 100 per cent in PVI Sun Life Insurance Company Limited (PVI Sun Life) and PT CIMB Sun Life, respectively.

Chinese insurers emerge stronger after tougher regulations, improved investment returns

Sun Life has tripled its earnings in the past five years to CAD$330 million (US$248 million) in 2017. It invested about CAD$1 billion to grow its business in acquisitions, among other investments. Connor said he expected the company to grow at 15-20 per cent a year in Asia over the next five years, especially in the seven markets it focuses on: China, Hong Kong, Vietnam, Malaysia, Philippines, Indonesia and India.

“We are a big company, so that gives us the scale to invest in experiments, to hire people to try new things and to invest in acquisitions that will bring us new capabilities,” he said.