Ping An Sees No Impact on China Insurance from Prudential/AIG Deal

By George Chen | March 5, 2010

Ping An Insurance, China’s No. 2 insurer, said on Friday it was not concerned about a plan by Britain’s Prudential to buy the Asia assets of U.S. insurer AIG, the market leader among foreign insurers in China.

Ping An does not believe Prudential’s acquisition of AIG’s Asia unit, AIA, would change China’s insurance landscape, said Chairman Ma Mingzhe, speaking on the sidelines of the opening of the National People’s Congress in Beijing.

“I believe domestic insurers are very competitive in China and we know our market very well,” said Ma of Ping An, partly owned by HSBC Holdings Plc. “I think foreign insurers will still have much to learn in China,” he added.

In what is the insurance industry’s biggest acquisition, Prudential is buying American International Assurance in a big bet on soaring demand in Asia for personal financial services. AIA is regarded as AIG’s crown jewel because of its size, cash generation and presence in fast-growth Asia.

Ma said Ping An was not interested in teaming with Prudential for the bid, amid some market expectations that Prudential may seek partners such as Asian sovereign funds and cash-rich large Chinese enterprises to help in its $35.5 billion acquisition plan due to the deal’s size.

Ma’s comments were in line with his counterpart Yang Chao, chairman of Ping An’s bigger rival China Life, who said the country’s No.1 insurer was not considering involvement in the Prudential-AIG deal.

“Purely from the financial perspective, I think we can afford to do deals like that, but we are not considering it and Prudential didn’t talk to us either,” Yang told reporters in Beijing.

China Life was in talks to invest in AIA last year or to subscribe part of AIA’s originally planned initial public offering of shares in Hong Kong but the talks failed to move forward, Chinese media reported.

Ping An’s Ma, whose firm made huge losses from a wrong bet on its investments in Europe’s Fortis amid the financial crisis, said he believed that domestic firms would continue to dominate China’s insurance market for at least the next five to 10 years.

While AIG can trace its Asian roots back to 1919, when Cornelius Vander Starr started a small insurance agency in Shanghai, AIA started in China in 1992. AIA in China is 100 percent owned by AIG — the only wholly-foreign owned insurer with special permission from Beijing to operate in the country.

Other foreign insurers have long complained to Beijing about AIA’s exclusive ownership status as they seek a bigger share of the country’s fast-expanding insurance business.

Prudential currently operates CITIC-Prudential Insurance Co in China, a 50-50 joint venture in China with CITIC Group, China’s biggest financial conglomerate.

When asked for comments on the future of AIA’s ownership status in China, Ma replied: “I think this will be a problem for Prudential to deal with.” He also noted Ping An would not be interested in AIA’s China assets even if they were put up for sale.

AIA collected 8 billion yuan ($1.17 billion) in premiums in 2009, accounting for 18.9 percent market share among Sino-foreign joint-venture life insurers in China, or nearly 1 percent of total market share, according to official data.

China’s top three insurers — China Life, Ping An and China Pacific Insurance, partly owned by the Carlyle Group — currently control a combined over 50 percent share of China’s life insurance market.

($1=6.826 Yuan)

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