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Hong Kong: Insurance M&A scene gets very active

Source: Asia Insurance Review | Apr 2018

Hong Kong M&A

M&A deals involving Hong Kong insurers reached US$2.84 billion in 2017, up from US$1 billion recorded in 2016, according to data from Thomson Reuters. More M&As are expected in the insurance arena. 
   MetLife Hong Kong is reportedly the latest target, with its New York-based parent seeking about US$600 million, according to a Bloomberg report quoting people with knowledge of the matter.
HK insurers attractive to both Chinese and non-Chinese firms
For sellers, there are several motivations. Hong Kong is a crowded market and is dominated by AIA, China Life and Prudential, which together raked in over half of the HK$436 billion (US$55.6 billion) in premiums from firms and individuals in 2016, reported Reuters. Growth prospects are limited and the territory’s appeal as a springboard into mainland China is waning, as foreign players will soon be allowed full ownership of Chinese businesses.
   Conversely, there are attractions for buyers from China. Getting licensed in China is difficult. A Hong Kong licence is the next best thing, especially combined with a Chinese brand. While Beijing has cracked down on purchases of insurance by mainlanders in Hong Kong to stem capital outflows, many reckon those curbs will ease.
   “The insurance products that are available in the mainland and those in Hong Kong are different,” Mr Keith Pogson, a senior partner at accounting firm EY told South China Morning Post. “This makes the ability to own a Hong Kong operation very appealing to mainland investors.
   He said the mainland companies who own a Hong Kong insurer could sell products to mainland Chinese individuals in the city while at the same time learn more about their products and technology, as these companies are usually owned by international players with a strong history and knowledge of the sector.
   “The trend for Hong Kong insurers to be takeover targets will continue,” Mr Pogson said. 
Top three deals’ buyers are from China
The top three deals in Hong Kong in the last five years involved buyers from the mainland, according to data from Thomson Reuters. 
   The biggest deal last year was made by Yunfeng Financial Group, the company backed by Alibaba Group Holding founder Jack Ma Yun, which agreed to buy MassMutual Asia – the Asian unit from US-based Massachusetts Mutual Life Insurance for HK$13 billion. The other two are Ageas Asia Holdings bought by Tongchuang Jiuding Invest (China) and Dah Sing Life Assurance by Fujian Thaihot Invest (China). A 
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