JD Capital is the leading bidder for Dah Sing’s insurance operations a person familiar with the matter said on Thursday, in the latest sign of Chinese financial institutions looking to diversify overseas.
Beijing-headquartered JD Capital has bid around $1.1 billion the person said. Other bidders include Guangdong-based property developer Country Garden and Chinese insurance firms.
Established in 2007, JD Capital is similar to other privately owned Chinese peers such as Fosun and Anbang, which have struck high-profile deals in recent years as they look to rapidly build international financial services platforms using the steady cash flow from insurance premiums.
Domestically, Chinese investment managers' and insurers’ capitalisation and profitability are under pressure from weaker macroeconomic conditions and falling interest rates.
Many of these young businesses, such as Fosun and JD Capital, are looking to transform capital made from early private equity deals into a more permanent financial services business. JD Capital has been hiring insurance experts such as Fang Lin from CPIC and using its publicly listed vehicle, including the original private equity business.
JD Capital also bid last August for the Hong Kong business of Ageas, offering HK$10.7 billion in cash.
Dah Sing, a diversified financial services group, said on January 12 that it was in the early stages of exploring strategic alternatives for its life assurance business and its bank’s life insurance product offerings.
The Hong Kong financial services group’s clever structuring of its $1 billion auction attracted initial interest from over 20 companies, according to another person familiar with the matter.
Several factors ensured widespread initial interest in the Dah Sing auction. The first is the relative scarcity of such insurance assets for sale in Hong Kong.
Insurance sales in Hong Kong depend heavily on both agency salesmen going door to door and sales via bank networks, a route known as bancassurance.
Very few come up for sale and the large banks either have a captive insurance company or already have exclusive partners. Citigroup inked a deal with Hong Kong-headquartered AIA in 2013, Standard Chartered renewed its alliance with Pru last year, while HSBC came to an agreement with Allianz for some of its Asian markets in 2012.
Secondly, Dah Sing is offering both distribution and a manufacturing capability and licence.
While Dah Sing’s insurance manufacturing capability is less valuable than the right to distribute products over its network, it has helped attract two types of bidder. On the one hand, it attracts those that are already in the market and looking to expand. On the other, it appeals to a plethora of mainland Chinese companies that are looking to enter the insurance market and are keen on the whole package.
The chairman of the China Insurance Regulatory Commission, Xiang Junbo, said on February 13 that the agency was processing nearly 200 applications for insurance licences.
Dah Sing has two businesses listed on the Hong Kong stock exchange: Dah Sing Financial Holdings, which houses the group’s life and general insurance business, and Dah Sing Banking Group, which has around 70 branches in Hong Kong, Macau, and China according to its website.
Citigroup is advising Dah Sing on its auction.
