KPMG Hong Kong's monthly insurance news summary

This publication is a summary of publicly reported information, the accuracy of which has not been verified by KPMG.

Hong Kong
Australia-based AXA Asia Pacific Holding (AXA APH) has said that it will review the opportunity to acquire the Asian assets of the Winterthur Group as soon as it is practicable. Winterthur's ex-Japan Asian assets include life insurance operations in Hong Kong, Taiwan, Indonesia and a 15.6 percent stake in China's Taikang Life Insurance Company. AXA APH's parent, AXA SA, has acquired Winterthur for USD 10 billion.

China
China Life Insurance Group, China Life Insurance Company (China Life) and China Life Asset Management Company have reportedly acquired 6.9 percent of the A shares of Bank of China at the bank's IPO in Shanghai. Separately, China Life and its parent have invested RMB 4.64 billion to acquire a combined 17.2 percent stake in CITIC Securities Company. China Life has also said that it hopes to buy into the Agricultural Bank of China (ABOC) during ABOC's restructuring and reform.

Ping An Insurance (Group) has received regulatory approval from the China Insurance Regulatory Commission (CIRC) to set up Hong Kong-based China Ping An Asset Management (Hong Kong) Company. Separately, Ping An Insurance is reportedly in the early talks with China Everbright Bank to acquire a stake in the domestic lender.

American International Assurance Company has reportedly received regulatory approval to invest in the domestic A-shares markets through its asset management centre in Shanghai.

China Property & Casualty Reinsurance Company has reportedly signed a cooperation agreement with AIU Insurance Company through the latter's branches in Shanghai and Guangzhou. The areas of co-operation include risk assessment and product development.

Great Eastern Life Assurance (China) Company, a Sino-Singapore joint venture, started operations in Chongqing in southwestern China. The company reportedly plans to open two to three branches by 2007 and at least 15 branches within five years.

China Pacific Insurance (Group) has reportedly received regulatory approval to set up Pacific Asset Management Company.

Generali China Life Insurance Company has received preliminary approval to set up a branch in Wuxi in Jiangsu province.

Taiwan Life Insurance Company has said that it will soon conclude talks to set up a life insurance joint venture in the mainland. China Southern Airlines and Sichuan Changhong Electric Company are reportedly potential partners for the joint venture.

Ping An Insurance, China Life Insurance Group, PICC Property & Casualty Insurance, and Taikang Life have been approved to invest in the domestic infrastructure sector on a trial basis.

Insurance Australia Group (IAG) is reportedly in negotiations to acquire a 24.9 percent stake in China Pacific Property Insurance Company. The talks are reportedly at the final stages. It is reported that IAG will set up two offshore subsidiaries as investment vehicles for the deal as there is currently a 20 percent regulatory limit on the maximum ownership by a single investor.

HSBC has said that it plans to set up an insurance joint venture in the mainland by the end of this year. The bank, however, did not disclose who will be its mainland partner(s).

Samsung Fire & Marine Insurance Company has received regulatory approval to set up a branch in Beijing. The new branch is expected to start operations in July.

Swiss Re has said that its acquisition of GE Insurance Solutions will have limited impact on its business in China and it does not have any plan to upgrade its representative office in Shanghai to a branch in near future.

Marsh Inc., a US-based risk management and insurance broking service provider, has said that it will restructure its global operations to focus more on growth in the Asian Pacific region, particularly in China. It is combining its Asia and Pacific operations to bring more resources to the region.

UK-based BUPA Finance Plc has reportedly received regulatory approval to open a representative office in Beijing.

China United Insurance Holding Company has been launched in Urumqi in northwestern China, following the restructuring of China United Property Insurance Company.

Heng An Standard Life Insurance Company has signed an agreement with China's Bohai Bank to co-operate in a range of activities, including the sale of insurance products, developments of new products and information systems.

Union Life Insurance Company, which is based in Wuhan in central China, has said that it plans to sell about 25 percent of its enlarged capital to foreign strategic investors and aims to increase its registered capital to RMB 600 million from the current 420 million to fund its rapid growth.

Shanghai-based joint venture Cathay Life Insurance Company has received regulatory approval to set up a branch in Hangzhou in Zhejiang province.

China Life and Taikang Life Insurance Company has received regulatory approval to invest purchased foreign exchange in overseas markets. Previously, qualified insurance companies were only allowed to invest their own foreign exchange reserves in overseas markets.

In brief

China

• China's State Administration of Foreign Exchange (SAFE) has relaxed some foreign exchange rules for insurance companies. Effective 1 June, insurance companies with foreign currency business licences are allowed to collect premiums either in renminbi or foreign currency for foreign currency-denominated policies. The restrictions on foreign exchange purchases have also been lifted for insurance companies' re-insurance business abroad.

• The China Banking Regulatory Commission has said that it will allow banks to establish and directly invest in insurance businesses. It will also support domestic insurance funds to take stakes in commercial banks.

• China's State Council has issued a circular outlining its view on the reform and development of the domestic insurance industry. Reflecting this, the CIRC has said that it will allow insurance companies to invest in both listed and unlisted stakes of well-managed commercial banks and allow qualified insurers to invest up to 15 percent of their total assets in overseas markets.

• It has been reported that the CIRC will ease the cap on insurers' investments in domestic stock markets this year. The existing rules set the maximum stock market investments at 5 percent of individual insurer's total assets.

• The CIRC has said that it will soon issue rules to govern health insurance business and the appointment of board of directors and senior management of insurance companies. It will also revise the rules to strengthen its supervision of foreign insurers' representative offices in China.

• The latest data from the CIRC shows that the insurance sector reported a 12.8 percent year-on-year increase in premium income to RMB 247.66 billion in the first five months of the year. Of these, premiums from property insurance reached RMB 60.53 billion, rising by 9.5 percent, while those from life insurance stood at RMB 165.66 billion, up by 13.1 percent. Total assets of the insurance sector stood at RMB 1.68 trillion.

Sources: Insurance Day, South China Morning Post, Xinhua Economic News Services, Asia Insurance Review and various insurance websites.

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© 2005 KPMG Hong Kong, the Hong Kong member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in Hong Kong. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

This publication is a summary of publicly reported information, the accuracy of which has not been verified by KPMG. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.