To see two very different outcomes of the financial crisis, one need only look at the contrasting fortunes of China Construction Bank (CCB) and ING.
While the Chinese bank enjoyed another year of continued growth, buoyed partly by stimulus lending, the Dutch insurance company underwent a painful restructuring, after accepting a €10 billion ($14.3 billion) bailout cheque.
So it should come as little surprise that ING closed 2009 by agreeing to sell CCB a 50% stake in Chinese insurance company Pacific Antai Life Insurance. Although neither party disclosed the value of the transaction, it looks highly likely that ING will be wiring the sale proceeds directly into Dutch government coffers.
ING originally acquired the stake in Pacific Antai when it bought the Asian operations of US financial group Aetna in 2000. In the period between January and November last year, Pacific Antai had a gross written premium income of Rmb888 million ($130 million).
Pacific Antai’s other shareholder, China Pacific Insurance, also intends to sell its stake in the company, reports Caijing Magazine.
If there is a consolation for ING, it is that the Dutch company is not entirely giving up on the promising insurance business in China. It still owns half of ING Capital Life Insurance, a joint venture with Beijing Capital Group, that focuses on the market in the north of the country.
CCB’s interest in Pacific Antai was in acquiring a presence in the life insurance industry. Even so, it looks like more of a toe in the water than a deep plunge. Pacific Antai is a relatively small player, with recorded assets worth just Rmb3.5 billion last July. CCB has assets amounting to several trillion yuan.
But CCB would have found it much harder to buy into a bigger target company. Even if a stake was up for sale, the latest rules from the insurance regulator prevent the largest players in the banking and insurance worlds from forming strategic partnerships. The idea is to prevent deals in which risk might spread across financial sectors.
Yet CCB still seems to want more than its Pacific Antai foothold in the insurance business. The bank is also set to take on an indirect stake in another insurer, as it is currently in the process of buying into Cinda Asset Management Company. Cinda was set up in 1999 to dispose of the CCB’s own bad debts. Cinda then went on to invest in other distressed debt. If this deal is completed, CCB would gain exposure to Cinda’s own insurance company, Happy Insurance.
Both the Antai and Cinda transactions now require the regulators’ rubber stamp. But some are sceptical that CCB will be allowed to hold two insurance licenses, and think the bank may be told to pick one of the two deals on offer.
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