European financial services provider Fortis has signed a life insurance company agreement with China Insurance Company (CIC), and its Hong Kong-listed subsidiary China Insurance International Holdings (CIIH). Fortis is to acquire 24.9% of the new joint venture, Tai Ping Life (TPL), for $88 million in equal proportion from both CIIH and CIC.
Tai Ping Life is a life insurance company with a national life insurance license. The company has been dormant since the 1949.
On completion of the deal, which will depend on Chinese regulatory approvals, CIIH will have a majority stake in Tai Ping Life, with 50.05%, CIC will have 25.05% and Fortis will own 24.90%, with an option to increase that to 49% following China's access to the World Trade Organization next year.
CIC, the former sole investor of TPL, recently transferred a majority interest in Tai Ping Life to CIIH.
"This is a unique opportunity for Fortis in respect of both the national license and the level of ownership they are able to acquire," says James von Moltke, Head of JPMorgan's Financial Institutions Group, which advised Fortis on the deal.
"Fortis was able to distinguish itself in a number of important areas, notably their willingness and ability to transfer skills, experience and technology to Tai Ping Life," he adds.
The choice of Fortis followed a competitive process among major international financial institutions, comments Yang Chao, chairman of CIC and CIIH. "Fortis' strengths, combined with those of high calibre management team that Tai Ping Life has already begun to assemble, provides an ideal combination to pursue the substantial market opportunities in China. In particular, Fortis' bancassurance experience will complement the traditional distribution strategies and will help elevate Tai Ping Life's platform in China."
The deal combines the highest shareholding in a Chinese national insurer ever granted to an international insurance company together with management involvement.
CIC is the parent company for the China Insurance group, one of the four domestic state-owned insurance groups created in 1999.
The four groups were created to introduce competition to a market previously monopolized by the People's Insurance Company of China (PICC). China Insurance group is the only company in China with international operations and a publicly listed subsidiary.
