China Life, which told the Financial Times it is preparing an overseas acquisition strategy, can take its pick of targets given the havoc the global financial crisis has wreaked on the market values of insurers.
Obvious targets could be parts of American International Group, which are on the block after what was once the world’s biggest insurer was rescued by the US government following losses on insurance written on complex financial instruments.
One of the most valuable parts of AIG likely to be put up for sale is its Asian life assurance operation. This could have an embedded value – which reflects the worth of in-force life assurance policies – of $18bn-$20bn. However, AIG has indicated it could retain a stake in this business.
Roman Cizdyn, analyst at Blue Oar Securities, says AIG is likely to be “an early port of call, particularly in the region”.
Alternatively, China Life could join forces with another insurer seeking to pick up parts of AIG.
Prudential, one of the biggest UK life assurers, is eyeing AIG’s Asian operation, and is talking to potential strategic investors about helping it to acquire the assets. The investor could take a stake of up to 20 per cent in the Pru.
China Life has in the past been mentioned as interested in the Pru, given the UK insurer’s strength in Asia. People familiar with the Pru’s negotiations said China Life could contribute to the fundraising but it was unlikely to be the lead investor on any deal.
But China Life, which is primarily interested in small to medium-sized financial groups, could look further afield, Mr Cizdyn suggests, to insurers in the US or Europe.
“If you wanted to be adventurous you could take a lump of US, or a lump of Europe,” he says.
Shares in the Pru’s rival Aviva have also fallen sharply, and with business in Asia, it could also be an attractive target for an overseas investor looking to take a strategic stake.
In contrast to the Pru, Aviva has ruled itself out of the race for parts of AIG, declaring any assets would be “grossly overvalued”.
Elsewhere, US life assurers, particularly those that sell popular savings products with guarantees built in, have been hard hit by the global financial turmoil.
Allianz, the German insurer, has invested $2.5bn in The Hartford to shore up the US life assurer’s finances.
Rival MetLife sold $2.3bn of new shares last month to strengthen its capital base.
But analysts at Goldman Sachs expect more US life assurers to raise capital.
“We believe each of the companies in our coverage universe will need to raise incremental capital,” they said in a recent note.
In continental Europe, the global financial turmoil has taken its toll on Aegon, the Netherlands-based insurer. However, like rival ING, it has accepted a €3bn ($3.8bn) capital injection from the Dutch state, and it is unclear how an overseas strategic investment would sit with a government stake.
But China Life is likely to be mindful of the the risks of investing in overseas insurers. A year ago rival Ping An took an almost 5 per cent stake in Fortis, but it has seen the value of its investment in the Belgo-Dutch financial group plunge.
文章
