The number of merger and acquisition (M&A) deals in the Hong Kong life insurance industry is reportedly set to accelerate given stiff competition and a large number of buyers in the market.
Both AXA and MassMutual have already sold their life insurance units in the city, while MetLife is expected to be the next on the trading block, according to a report by the Business Times.
The Hong Kong life insurance market is crowded, with AIA, China Life, and Prudential dominating the market. The three insurers brought in over half of the HKD$436bn (USD$55.74bn) in premium revenue for 2016.
Firms with a smaller market share may opt to combine together in order to compete with the bigger companies.
Meanwhile, there is a rush of investors looking for a piece of the Hong Kong insurance pie many of whom are from mainland China. As getting an insurance license on the mainland is quite difficult, many investors opt to purchase an existing company in Hong Kong and sell to a mainland clientele. While Beijing has imposed restrictions on mainlanders buying Hong Kong insurance policies, experts believe these restrictions will be eased in the future.
According to the report there are many other reasons for insurers to sell their Hong Kong ventures. For example, Generali is struggling with larger issues and is looking to exit several markets. Insurers can also sell a stake to partners that could help them in their expansion and diversification, such as when Aviva partnered with Chinese internet giant Tencent to help in its digitalisation and reaching a wider market.
Due to limited financial information being made public, a value has yet to be outlined for Metlife’s impending sale, but Bloomberg estimated it at US$600mn or possibly higher.