Mitsui Sumitomo Insurance (MSI) has agreed to acquire 37.5% stake in Chinese insurance company BoComm Life Insurance from Commonwealth Bank’s subsidiary Colonial Mutual Life Assurance Society (CMLA) for RMB3.2bn ($668m).
Image: Mitsui Sumitomo to enter Chinese market with this acquisition. Photo: Courtesy of Commonwealth Bank of Australia.
The transaction is subject to regulatory approval from the China Banking and Insurance Regulatory Commission.
Before the transaction is completed, BoComm Life intends to increase its capital for which Commonwealth Bank will contribute RMB1.125bn ($235m) on a pro rata basis. This amount will be separately reimbursed in full by MSI during the completion of the transaction.
The transaction is also dependent on upon the completion of the condition of the sale of Commonwealth Bank’s life insurance businesses in Australia and New Zealand to AIA Group. This is also subject to regulatory approvals in Australia and New Zealand.
Mitsui Sumitomo stated that China, being the third largest life insurance market in the world after the US and Japan, is expecting growth in the future.
By entering the Chinese market, Mitsui Sumitomo aims to enhance its growth potential and profitability while achieving further risk diversification of its group-wide business portfolio.
BoComm is claimed to have a market capital equivalent to about JPY7.3 trillion ($670m) by the end of this April. It is also considered to be one of the major five Chinese banks and is an integrated financial group with subsidiaries in insurance, assets management, securities, leasing, and trusts.
Commonwealth Bank CEO Matt Comyn said: “This transaction represents a further step in simplifying and focusing our portfolio and follows the announcement of the proposed sale of the Group’s life insurance businesses in Australia and New Zealand to AIA Group, and the strategic review of the Group’s life insurance business in Indonesia.”
Similar to other Asian countries, the importance of bancassurance channel is rising in Chinese life insurance market. Statistically, the ratio of revenue through bancassurance to the overall premium revenue in China increased from 36.7% in 2013 to 44.1% in 2016.
Like in other Asian countries, the importance of bancassurance channel is rising in Chinese life insurance market. The ratio of revenue through bancassurance to the overall premium revenue in China increased from 36.7% in 2013 to 44.1% in 2016.
BoCommLife takes advantage of bancassurance channel of BoComm, which has strong customer base, and is expected to have stable growth.