French global insurance company AXA has announced that it had entered into an agreement with the current domestic shareholders of AXA Tianping Property & Casualty Insurance to acquire the remaining 50% stake of the company that it does not already own.
“This is a 'first of its kind' transaction in the Chinese insurance market whereby a leading P&C insurer, with a nationwide footprint, will be fully owned by a foreign company,” said Mr Thomas Buberl, AXA chief executive, of the industry breakthrough.
Total consideration for the acquisition of the 50% stake would amount to CNY4.6bn ($662m), of which, subject to regulatory approvals, CNY1.5bn should be financed through a capital reduction of AXA Tianping to buy back shares from the current domestic shareholders, AXA said in a statement.
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, most notably from the CBIRC.
On the completion of the transaction, AXA Tianping will be fully consolidated into the AXA Group’s financial statements.
“AXA Tianping represents a unique platform for AXA to capture fully the significant growth potential of the property and casualty and health markets in China,” Mr Buberi said.
He also said, “The acquisition further reaffirms our conviction that our operations in China will be a key growth engine of the group and in its preferred segments.”
Mr Gordon Watson, chief executive of AXA Asia, said, “With full ownership and management control of AXA Tianping, we will further accelerate the deployment of our strategy to create a leading insurer that champions health care and mobility solutions.”
In 2017, AXA Tianping ranked 15th amongst China’s P&C insurers, and is the only foreign invested company in the top 20 P&C insurers in China. It is a leading company in direct motor insurance (6th in the market), with motor insurance contributing 91% of GWP, of which 41% is distributed through direct channels. It also sells short-term health insurance products.
AXA Tianping has developed a national footprint with 25 branches and 93 sub-branches, covering 20 provinces which together generate over 85% of China’s GDP.
The AXA announcement follows Chinese regulatory approval for German insurance giant Allianz for a wholly-owned insurance holding company, to be set up in Shanghai next year.
The approvals are being viewed by analysts as a gesture by Beijing to open up its financial sector, before a meeting between Chinese President Xi Jinping and US President Donald Trump in Argentina during the G20 summit which is to be held on 30 November-1 December. These moves are seen too as aimed at dispelling scepticism that Chinese authorities would act in a timely manner to open up the market despite pledges they made. The approvals are thus being granted earlier than expected.
Beijing said in November last year that for life insurance ventures, it would first raise the foreign ownership cap to 51% from 50%. It has also pledged to remove the limit completely in three years.