China Pacific Insurance Has No M&A Plans Despite Hong Kong Listing
By Rebecca Ng
China Pacific Insurance (Group) Co. Ltd. [90598] said it will focus on domestic organic growth instead of growing through mergers and acquisitions once it completes its capital-raising activity through a Hong Kong listing by the end of December.
The Shanghai-based insurer said it will offer about 861 million H-shares [Hong Kong shares] through the global offering. Of that, around 43 million shares will be offered in Hong Kong.
The insurer aims to raise capital of up to HK$25.9 billion (US$3.3 billion), with an issuing price of between HK$26.80 and HK$30.10 per H-share. It is expecting to list in Hong Kong on Dec. 23.
Guofu Gao, chairman of CPIC, said at a press conference that CPIC is an “insurance business-focused” company, and the proceeds from the global offering will “support its business developments in the coming three years.”
“Currently, we do not have any plan for mergers and acquisitions in China and overseas, but we will focus on the domestic insurance business,” said Gao.
He also said management does not have any investment plans in Taiwan, though the Chinese government earlier announced a policy to develop the Haixi Economic Zone on the west coast of the Taiwan Strait.
Foreign Investors
The insurer said it has six cornerstone investors, including two foreign insurers: Germany’s Allianz S.E. [85014] and Japan’s Mitsui Sumitomo Insurance Group Holdings Inc. [52662]. The other four are China or Hong Kong-based investors: Chinese state-owned agricultural trading and processing company China National Cereals, Oils & Food Stuffs Corp.; China Overseas Land & Investment Ltd.; midsize Hong Kong lender Dah Sing Banking Group Ltd.; and Regal Real Estate Investment Trust Chairman Lo Yuk-sui. These investors committed to subscribe to a total US$395 million worth of CPIC shares, the insurer said.
Allianz confirmed with BestWeek Asia/Pacific that it participated in the CPIC capital raising and invested US$150 million, with a lock-up period of six months. Mitsui Sumitomo said it has invested US$65 million to the Chinese insurer.
Singapore-based Christoph John, regional head of corporate communications of Allianz Asia Pacific, said Allianz and CPIC entered into a non-binding set of key cooperation principles on Dec. 3 in Shanghai, where CPIC is based.
John said cooperation between the insurers will include “asset management, particularly the pension business, as well as evaluating the future cooperation in areas of insurance product development, reinsurance and investment.”
“CPIC’s business model is similar to ours,” said John. He added that CPIC is a “top three” player in both life and property/casualty insurance, with an “excellent brand name and strong distribution capability” in China.
CPIC was established in 1991 and is headquartered in Shanghai. The insurer originally planned to list in Hong Kong in 2007 when it was listed on Shanghai’s stock exchange, but the global financial crisis led to the IPO’s postponement. With the market recovery this year, CPIC said it decided to reactivate its Hong Kong public offering as an H-share global offering on Dec. 10 and expects to trade in Hong Kong beginning Dec. 23.

New Zealand Seeks
To Attract Asian Captives
By Iris Lai
New Zealand’s captive insurance industry is aiming for the gradual growth of its business base in the Asia-Pacific region by building on its base of Australian-owned foreign captives and domestic captives.
The Asia-Pacific region’s insurance business development and current economic climate will drive demand for captive insurance in the region, said Peter Lowe, president of the New Zealand Captive Insurance Association.
Moving toward a more mature business portfolio, Lowe said more corporates are looking into different strategies of risk management and cost control. Increasingly, Australian corporates realize the needs for alternative risk investments and management, and captive insurance is seen as one tool for long-term development.
Although captive insurance is “extremely” under-developed in Asia, Lowe said the potential for growth is great, given the region’s pace of development. Countries with big manufacturing bases such as Japan, South Korea and China offer potential for new captives.
New Zealand’s Aim
In New Zealand, the number of captives grew from 2 to 22 between 2002 and 2008. These captives’ business lines mainly come from the energy, electricity, agriculture and manufacturing sectors, as well as the airline industry. Some of New Zealand’s big corporates such as Fonterra, Air New Zealand and Carter Holt Harvey, have set up their own captives in the country.
Among the 22 captives in New Zealand, six are Australian-owned captives, with the remaining from New Zealand. The 22 captive insurance companies in New Zealand currently underwrite a total of NZ$80 million (US$57 million) in gross premiums annually.
“We believe that New Zealand could become the captive domicile for the Asia-Pacific region,” said Lowe in an interview. Initial growth is coming from Australia and New Zealand, and the expansion will then develop from other Asian countries such as Japan, South Korea and China, he said.
New Zealand’s geographical proximity to Australia, similar legislative and tax systems, and a 20% lower currency exchange rate to Australian dollars are some of the key attractions for Australian corporates to establish captives in the country. Many Australian companies already have subsidiaries in New Zealand, through which they are familiar and feel comfortable with the country’s infrastructure, noted Lowe.
In general, Lowe said New Zealand has a secure political system, good legislation and professional work force for foreign captives. Effective cost structures with competitive regulatory, auditing, management and legal fees are also cited as attractive factors.
In the past few years, Lowe said New Zealand has been successful in building a captives business from Australia. The captive industry will continue to attract and build the business from Australia at this stage of development.
In the longer term, Lowe said New Zealand aims to translate its Australia-driven foreign captive business to a bigger profile in Asia. The captive industry is seeking business from Japan, aiming to serve as a favorable captive domicile for Japanese companies compared with other Asian domiciles where, he said, Japanese firms may find it more difficult to set up.
The captive industry has made a significant contribution to New Zealand’s economy, according to Lowe. “With the right regulation, within 10 years we believe the industry could grow to 150 captives paying NZ$50 million a year in tax to the government,” he said.
With appropriate regulation, Lowe noted there is potential for significant growth in New Zealand. After the success from a developed Australia market, Lowe said there will be more attraction for Asian companies in the future.
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