Hong Kong life insurance market could see M&A frenzy

Conditions are ripe for an upswing in insurance purchases in the market

Hong Kong life insurance market could see M&A frenzy

Insurance News

By Gabriel Olano

The number of M&A (merger and acquisition) deals in the Hong Kong life insurance industry is reportedly set to soar given stiff competition and an abundance of buyers in the market.

AXA and MassMutual have already their sold life insurance units in the city, while MetLife is expected to be the next on the trading block, according to a report by the Business Times.

The Hong Kong life insurance market is crowded, with three huge insurers dominating. These firms – AIA, China Life, and Prudential – brought in more than half of the HK$436 billion (US$55.74 billion) in premium revenue for 2016. Firms with a smaller market share may opt to consolidate in order to compete with the bigger players.

Meanwhile, there is an influx of investors looking for a piece of the Hong Kong insurance pie, and many of these are from mainland China. As getting an insurance license on the mainland is quite difficult, many investors opt to purchase an existing company in Hong Kong and sell to a mainland clientele. While Beijing has imposed restrictions on mainlanders buying Hong Kong insurance policies, experts believe these restrictions will be eased in the future.

Several other reasons for insurers to sell their Hong Kong ventures exist, according to the report. Italian insurer Generali, for example, is struggling with larger issues and is looking to exit several markets. Insurers can also sell a stake to partners that could help them in their expansion and diversification, such as when British insurer Aviva partnered with Chinese internet giant Tencent to help in its digitalisation and reaching a wider market.

Due to limited financial information being made public, a value has yet to be outlined for MetLife’s impending sale, but Bloomberg estimated it at US$600 million or possibly higher. With conditions ripe for an M&A upsurge in Hong Kong, both investors and insurance professionals better keep on their toes.

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