France’s AXA Group is buying out the Chinese partners in its Mainland joint venture for 4.6 billion RMB (US$662 million), a move that will make it the first foreign insurer to wholly own a top 20 property and casualty (P&C) insurance firm in China.
AXA, which currently owns 50% of AXA Tianping Property & Casualty Insurance Company (AXA Tianping), has signed an agreement with its domestic partners to acquire their half of the shareholding, the company says in a statement on November 27. The deal is subject to regulatory approvals.
According to AXA, full management control of the firm will allow the company “to accelerate its strategy in the largest growing market in Asia”.
“AXA Tianping represents a unique platform for AXA to capture fully the significant growth potential of the P&C and health markets in China,” AXA Chief Executive Officer Thomas Buberl says in the statement.
The deal includes AXA buying back its Chinese partners’ shares in AXA Tianping for 1.5 billion RMB in a capital reduction exercise.
The domestic shareholders are Shanghai Yi Ke Joint Venture, Hainan Hua Ge Industrial Investment Co., Tian Mao Industrial Group Joint Stock Corporation, Hainan Luda Technology Co., and Rixingkang Biology Engineering Co.
AXA Tianping is the 15th largest P&C insurer in China with around 1 billion euros (US$1.13 billion) of gross written premiums. AXA acquired its 50% stake in 2014 from Shanghai-based Tianping Auto Insurance for 3.9 billion RMB.
China has allowed foreign insurers to set up wholly-owned P&C units since the country joined the World Trade Organisation in 2001. But most foreign P&C insurers in China are small- and mid-sized companies, says Frank Yuen, an assistant vice-president and analyst at ratings agency Moody's Investors Service.
“Although AXA Tianping is still far from catching up to the top ten P&C players, full ownership will allow (AXA) to have stronger control of pricing, product design and underwriting,” Mr. Yuen tells Asia Asset Management (AAM).
According to Wang Guojun, an insurance professor at Beijing-based University of International Business of Economics, full management control will allow foreign insurers to implement their marketing and product strategies more effectively in China.
“We’ve seen some Sino-foreign insurance joint ventures do not perform very well. One of the reasons is the cultural difference between their foreign and domestic shareholders,” Mr. Wang tells AAM.
Paris-based AXA had 1.43 trillion euros of assets under management at the end of 2017.