AIA to buy 25% of China Post Life Insurance for US$1.9bn
AIA Group Ltd, an American multinational finance and insurance corporation, has today agreed to purchase a 25% stake in China Post Life Insurance, a subsidiary of China’s postal service operator, China Post Group Co. Ltd. It is reported that the company will buy the share for US$1.9bn (12bn yuan). China provided AIA with a third of its new business in 2020. The group said that its Chinese life insurance business “would remain independent of this investment”.
China Post Life Insurance, a company that targets the Chinese mass market and emerging mass-affluent consumers had a value of new business (VONB) of US$289bn for the year 2020. VONBs measure an organisations’s expected profits from new premiums.
AIA China’s operations, on the other hand, which focus on middle-class and affluent customers, had a VONB of US$968mn for 2020, accounting for 32% of the company’s total value.
The Chinese insurance market
"The Chinese insurance market is already the second-largest in the world with immense long-term growth opportunities”, AIA’s Group Chief Executive and President Lee Yuan Siong said in a statement. He added that the investment would enable AIA to benefit from additional distribution channels and customer segments.
The insurance industry in China has seen rapid growth over the past decade. China Life Insurance was, at one point, the second-largest insurance company in the world in terms of market capitalisation. However, its value has declined since the 2008 stock market peak.
In 2007, China was home to 100 insurance companies, of which 59 are funded domestically, and the remaining 41 are funded by foreign parties. China Life Insurance has held around a 50% share in the life insurance market with Ping An Life Insurance ranking in second place with a 16% share in corresponding markets.
AIA’s share in China Life Insurance is yet to be confirmed, as it awaits approval from the China Banking and Insurance Regulatory Commission.
CB Insights: US Insurtechs Are Competing In A Global Market
In the first half of the year, insurtech companies around the world have raised US$7.4bn, nearly doubling their funding in Q2. According to Digital Insurance, insurtechs have raised US$4.8bn in Q2—an 89% increase in funding from Q1. But US firms are no longer the sole beneficiaries.
What Are the Stats?
Out of the 15 Q2 mega-rounds—those that top US$100mn—only eight included American firms. Pretty good, you might say. That’s over half! But US companies only made up 38% of the deals, which marks a 10% drop from Q1 and a 12% drop from 2020. Technically, therefore, US insurtechs are less influential than they’ve been in the past. But who says this is a bad development?
Despite my American citizenship, I’d argue that a more globally diverse insurance market is only for the best. Many of the world’s citizens who could most benefit from improved insurance services live outside of the States—and deserve local, tech-savvy services.
Why Does This Matter?
You’re always going to see the typical insurtech contenders from Western countries. For instance:
- German-based wefox: US$650mn Series C
- UK-based Bought By Many: US$350mn Series D
- US-based Collective Health: US$280mn Series F
But it’s critical that we address risk across the world. American insurtechs might be some of the most technologically skilled firms in the industry, but it’s not their first goal to address floods in Southeast Asia, crop destruction in China, and COVID complications in South Africa. That’s why we should celebrate that the recent Q2 round included insurtechs from 35 different countries.
According to CB Insights’ Q2 2021 Quarterly InsurTech Briefing, this was the first time that they’d observed insurtech activity in Botswana, Mali, Romania, Saudi Arabia, and Turkey. And ‘from a product, service, distribution, and underlying risk perspective, we—as a society and as an industry—are moving at an unprecedented speed’, says Dr. Andrew Johnston, Global Head of Willis Re InsurTech.
Just ask CB Insights. InsurTech value propositions have resonated with the world.