Insurers look abroad to get better returns on premium income
Anbang Insurance Group aims to take a 10 percent stake in South Korea's state-run Woori Bank, Reuters reported on Wednesday, a move that experts said underscores domestic insurers' interest in expanding abroad.
The report cited an anonymous source as saying that multiple parties have expressed interest in taking a minority stake in Woori Bank, and it noted that Korea Deposit Insurance Corp, which already has a 51 percent stake in the lender, is evaluating details of a sales plan and examining potential offers.
A 10 percent stake in Woori Bank would be worth 343 billion won ($297.35 million), based on prices at the close of Tuesday trading, Reuters said.
Woori Bank didn't respond to an interview request by the Global Times as of press time.
This isn't the first sign of interest from Anbang in Woori Bank.
The insurer bid for a stake of more than 30 percent in October 2014, domestic news portal sina.com reported. That proposal failed because Anbang was the sole bidder, while South Korean rules require at least two offers in such cases.
The company also announced in April this year the signing of a sales and purchase agreement with Allianz Group, adding Allianz Life Insurance Korea and Allianz Global Investors Korea to its global portfolio.
Anbang has also acquired landmark buildings in the US, including the Waldorf Astoria Hotel in New York City in a deal worth $1.95 billion.
Tuo Guozhu, a professor of insurance at the Beijing-based Capital University of Economics and Business, noted that like Anbang, domestic insurers including Fosun Group and Ping An Insurance Co have sought overseas assets in recent years.
"With premiums streaming into domestic insurers, these companies need to consider how to secure lucrative returns on these inflows," Tuo told the Global Times on Wednesday.
Tuo said that premiums provide a reliable channel to long-term, low-cost capital.
The low cost of capital is a double-edged sword for insurers. It can make it cheap for them to raise funds domestically but also difficult to achieve good returns on their premium income. The latter situation is driving many to look abroad.
Domestic insurers are experiencing problems due to falling interest rates and uncertainties over China's economic outlook, according to a report Moody's Investors Service sent to the Global Times on Wednesday.
In March, the US-based credit rating agency lowered the outlook for the Chinese life insurance industry to negative from the stable outlook assigned in September 2015. It did so in view of what it said was the increased probability that the overall creditworthiness of Chinese life insurers might deteriorate within 12 to 18 months.
"The Chinese insurance industry is undeveloped and less profitable than its Western counterparts, so advancing abroad is a great choice," Tuo noted.
Simon Harris, global head of insurance and managed funds at Moody's, agreed.
The outbound capital is channeled into diverse sectors, of which insurance and high-priced assets like hotels and real estate are the two primary destinations, Harris told the Global Times on Wednesday.
Domestic enterprises have an opportunity to upgrade their core businesses, diversify and drive up their asset values, Harris said.
Diversification through mergers and acquisitions lowers the risk of focusing on a single market segment, Moody's said.
