Hong Kong-based AIA Group has received regulatory approval to set up a wholly-owned unit in China, the first international company to make the move since Beijing eliminated foreign ownership limits in Chinese life insurers earlier this year.
AIA will convert its branch in Shanghai into a unit after receiving the go-ahead from the China Banking and Insurance Regulatory Commission.
The Shanghai branch, which was set up in 1992, is the oldest of the company’s seven branches in China.
AIA will also seek approval to convert the other branches into units, the company says in a statement on June 22.
Foreign investors were previously only allowed to hold a maximum 51% in a Chinese life insurer. Beijing scrapped the shareholding limit this January.
AIA Chief Executive and President Lee Yuan Siong proclaimed himself as “delighted and honoured” to get the greenlight to turn the Shanghai branch into a unit.
“AIA traces its roots to Shanghai in 1919 and it is entirely fitting to base our new subsidiary in the city where we began,” he says in the statement, adding that the company has been “focused on contributing meaningfully to the sustainable development of the life insurance industry” since returning to China almost three decades ago.
AIA, which was originally known as American Asiatic Underwriters, relocated to New York in 1939 after Japan invaded China.
The go-ahead to set up a wholly-owned unit is “credit positive” for AIA because it will speed up the company’s process to establish new units across China, its fastest growing market, according to Frank Yuen, a senior analyst in the financial institutions group of ratings agency Moody’s Investors Service.
“Specifically, AIA China was the group’s largest [new business] contributor in the first quarter of 2020 and it benefited from an uptick in policy sales as [coronavirus] lockdown measures eased down,” Mr. Yuen says in a report on June 22.
Moody’s currently has an Aa2 rating on AIA Group, which had US$284 billion of total assets as of December 2019.