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INVESTMENT: Allianz establish the first ever 100% foreign owned insurance holding in China
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Allianz establish the first ever 100% foreign owned insurance holding in China
By Daniela

BT 201901 in depth 01安联集团获批筹建中国首家外资保险控股公司

安联集团获得中国银行保险监督管理委员会批准筹建中国第一家新设立的外资全资保险控股公司。作为100%外资全资的保险控股公司,将提升安联集团在中国扩大投资和发展的战略灵活性,是中德两国长期友好双边合作的又一见证。

安联集团宣布:中国银行保险监督管理委员会正式批准安联集团筹建安联(中国)保险控股有限公司。该保险控股公司将成为迄今为止中国首家新设立的外资保险控股公司。公司将注册在上海。

此次安联(中国)保险控股有限公司的获批筹建表明了安联集团对中国市场的坚定信心和长期承诺,将提升安联集团在中国市场的战略及财务灵活性,帮助安联集团在中国市场抓住商业机会,推动长期发展。待正式成立时,安联中国控股将得到与其设立申请相一致的强劲的资本金支持。

依托中国政府近期出台的一系列扩大对外开放、鼓励外资金融机构扩大在华投资的政策,此次安联(中国)保险控股有限公司的获批筹建是中国金融保险业进一步对外开放的积极举措,是中德两国长期友好双边关系的又一见证,并将进一步推动两国合作关系的发展。

China Banking and Investment Regulatory Commission (CBIRC) announced that German insurance company Allianz will be the first one to get the permission to set up an entirely foreign owned insurance holding in China. This move has come as a huge surprise, because something like this was not expected in at least next three to four years, based on Beijing’s earlier announcements.

BT 201901 investment 03Market Share and Management

Despite their efforts, foreign insurers in China managed to capture only a tiny fraction of market share and they face real struggle in penetrating the market. More precisely, market share of foreign life insurers in China last year was slightly below 7%, despite the fact that Chinese middle class continues its growth at a fast pace. Beijing announced earlier that they will change the cap in foreign ownership from 50% to 51%, and also stated that the cap will be removed completely in the next three years, which is why the news came unexpected.
 

The change itself would not have significant impact on the balance sheet of foreign companies. However, its greatest advantage for foreigners would be taking over the control from Chinese shareholders. This is important, because the main source of conflict among Chinese and foreign shareholders revolves around management styles which are entirely different. The speed and the way of expansion in the eyes of foreign shareholders is too slow. This way, they will be able to gain control over the management, and point a company into direction which they believe will accelerate the expansion of business and improve market penetration.
 

About Allianz Group and its Plans for China

BT 201901 investment 04The legal entity named Allianz (China) Insurance Company Limited will be the first 100% foreign owned insurance holding in China. Allianz announced that this new entity will be settled in Shanghai and that they will establish it in 2019. However, they did not specify how the holding will work together with the several existing joint ventures in mainland. It is expected that the Allianz China will even further tighten the relationship between China and Allianz Group, and that it will achieve long term success in Chinese market. According to its application, this new company will be strongly capitalized.
 

Allianz already has long history in China, which dates back to 1910s. It employs more than two thousand employees and affiliates. It is active in 14 markets in Asia. Establishment of the new entity is a milestone for the company and China as well. According to their press release, Allianz considers China their key growth market. Moreover, they expect premiums to grow 14% annually in the next ten years.
 

Allianz Group is headquartered in Munich (Germany) and it is one of the major players in the global insurance market. They employ over 140,000 people and have over 88 million retail and corporate customers globally. They set up life insurance joint venture in 1999 in China with Citic Trust, which has 49% equity ownership, while Allianz has 51%. Its overall market share is 0.07% in 2018 so far, according to CBIRC. In addition, the company owns 50% of Allianz China General Insurance Company, which is located in Guangzhou, and it captured 0.1% of the overall markets share in September 2018.

BT 201901 investment 02
Oliver Bäte, Chairman and CEO of Allianz Group

Oliver Bäte, the Chairman and CEO of Allianz Group, expressed they are proud to be the first ones to get the approval. Regional CEO for Asia Pacific at Allianz, George Sartotel, said that this is a new opportunity for the company to use its global knowledge and combine it with their knowledge on local demands and needs. He also emphasized that China is the most important for their growth in Asian region. In addition, Bate’s contract, which was supposed to expire in 2019, was extended to 2024, which confirms that his strategic approach is considered right in the eyes of Allianz’s Supervisory Board.
 

Future of Chinese Insurance Market

BT 201901 investment 05Government aims to boost its financial markets and the President Xi Jinping pledged at the Boao Forum for Asia that China will further open up its insurance sector. China will accept other applications as of 2019 from foreign insurers, who are interested to take the full control over their joint ventures.
 

Supposedly, Britain’s Prudential Plc and Canada’s Sun Life Financial Inc are interested to increase their ownership. Plans for opening up the world’s third largest insurance sector are obviously not put on hold, regardless of the Sino-US trade war. On the one side, these are the positive news for international companies that are expected to appear in China given the new circumstances and the fact that this market is the world’s fastest growing insurance market.
 

On the other side, investors should take into consideration that with everyone wanting their piece of cake in this large market, it will be harder than ever to penetrate the market, or improve the penetration rate of the existing companies. Furthermore, the most challenging task for foreign companies will be to battle the dominant Chinese insurance companies China Life and Ping An. In conclusion, it is natural to assume that clients will probably profit from this increased competition in terms of improved and more affordable services. Moreover, new job opportunities for Chinese will emerge with the arrival of new companies.

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