Canadian insurer Manulife Financial Corp and Switzerland’s Ace Ltd are among bidders for New York Life Insurance Co’s Hong Kong, Taiwan and South Korean assets, sources said, in a deal valued between $800 million and $1 billion.
Unlisted NY Life is pulling out of the three Asian markets where it has a limited presence and has mandated Deutsche Bank to run the auction, sources with knowledge of the matter told Reuters.
NY Life’s proposed sale is a continuing trend of some Western financial institutions pulling out of Asia. Last year, British insurer Aviva plc and Dutch firm ING Groep sold their Australian businesses, while British lender Royal Bank of Scotland plc sold most of its Asian franchise.
While low penetration of insurance in many Asian countries makes the region a hot bed for foreign insurers, only some companies have been able to make a dent, analysts said.
“A number of foreign players have been around for about 20 years or more, but despite that many have failed to make inroads or money in the region,” CLSA Asia-Pacific Markets analyst Patricia Cheng said.
“So some of them have decided to withdraw from some marginal markets rather than waiting for another ten years to build the business,” she added.
According to a McKinsey study last year, Asia should account for up to 40 percent of the global life insurance market’s growth over the next five years. China and India will represent about 70 percent of that growth.
“For people outside the region, Asia is a growth market. But realistically, execution in Asia is very challenging,” CLSA’s Cheng added.
NY Life will soon allow selected bidders to advance beyond the first round, with the process expected to be completed in October.
NY Life, Manulife, Deutsche Bank and Ace declined to comment.
Sources declined to be identified because the sale process is confidential.
“These are pretty small businesses in three markets, where they are finding a little bit tough to compete,” one source familiar with the process said. NY Life will continue to operate in some markets such as China and India, the source added. “The demand is pretty selective,” the source said.
Ace owns 20 percent stake in Huatai Insurance Co of China and media reports have said Ace plans to expand in Asia and Latin America.
Other insurance deals that will keep Asian bankers busy this year include the upcoming initial public offer of American International Group Inc’s Asian life insurance market, which is expected to raise about $15 billion..
AIG is also in the process of selling its life insurance business Nan Shan Life for $2.2 billion..
(Additional reporting by Michael Flaherty, Cameron French and Steve Eder; Editing by Jacqueline Wong and Lincoln Feast)
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