Shopping Spree by Chinese Money

China-based Anbang Insurance took over Allianz Life Insurance in South Korea, following the acquisition of Tong Yang Life Insurance last year.
China-based Anbang Insurance took over Allianz Life Insurance in South Korea, following the acquisition of Tong Yang Life Insurance last year.

 

Anbang Insurance took over Allianz Life Insurance. Industry insiders pointed out this implies that more and more South Korean insurers can be acquired by Chinese companies over time. 

"This year's shopping spree by Chinese firms is showing no sign of slowing down. Although the deal (Anbang buying Allianz's South Korean operation) is much smaller than Anbang’s failed attempt to acquire Starwood, it does demonstrate the Chinese insurer’s continued appetite for international expansion through acquisitions,” said Kamel Mellahi, Professor of Strategic Management at UK-based Warwick Business School.

Mellahi, who is also researching business in China, went on to say, “The acquisition of Allianz's South Korean operation will strengthen Anbang’s footprint in its core business outside China. This is Anbang’s second deal involving a South Korean insurance firm and therefore one expects significant synergies to be gained from managing the two entities."

According to the Korea Life Insurance Association, the combined asset of Allianz Life Insurance and Tong Yang Life Insurance, which was acquired by the same Chinese financial company last year, amounted to 39.2219 trillion won, the fifth-largest in the industry, as of the end of last year. In addition, the total number of the insurance consultants employed by them was 7,024, the fifth-largest in the industry as well. This means that a merger of the two can lead to the emergence of a giant insurer.

In the meantime, the South Korean insurance market is expected to go through a period of drastic change much earlier than expected as the growth of the market is slowing down at a rapid pace. It is in this same context that the price of Allianz Life Insurance, approximately 250 billion won, was much lower than expected at the time of the acquisition by Anbang Insurance.

At present, ING Life Insurance, KDB Life Insurance and PCA Life Insurance are on the M&A market. ING Life Insurance ranks fifth in asset and fourth in current net profit. MBK Partners acquired ING at 1.84 trillion won in 2013 and, more recently, Morgan Stanley was selected as the lead manager of the deal. It is likely that MBK Partners will sell ING as early as possible with the prices of the insurers on the M&A market showing a downward trend.

KDB Life Insurance has an asset of 15.4311 trillion won and a current net profit of 27.6 billion won. PCA Life Insurance, which has 5.2504 trillion won in asset and 20.5 billion won in current net profit, selected Morgan Stanley as its lead manager last year. The prices of the two insurers are predicted to keep falling due to the lack of growth factors, too. 

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution