Banks Expected to Provide Help for Insurance Partners

It remains uncertain whether the banking partners will threat or help the insurers, after China Insurance Regulatory Commission (CIRC) granted approval for banks to invest in insurance companies.

Recently, CIRC as the insurance industry watchdog gave approval for Shanghai-based Bank of Communications (BoCom, 601328.SH, 3328.HK) to acquire a 51% stake in China Life-CMG Life Assurance Company Limited from China Life Insurance (Group) Company. Besides, Bank of China (601988.SH, 3988.HK) has also received the regulatory nod to make equity investment into Heng An Standard Life Insurance Co.

Actually, CIRC is understood to expect these commercial banks to help their insurance partners expand the market share via the move. With abundant customer resources and extensive network coverage, banks could help insurers sell the insurance products via cross sales, according to industry experts. Although the bancassurance sale is operating well, the personal sales channel of some large insurance groups in the country is so strong that smaller insurers have to rely on the banking partners to compete for more market share.

Still, compared with BoCom, Industrial and Commercial Bank of China (ICBC, 601398.SH, 1398.HK), China Construction Bank (CCB, 601939.SH, 0939.HK), and Bank of Beijing do not go smoothly when making equity investment into the target insurers, due to complicated relations with the target insurers.

Based in Beijing as a state-owned commercial bank, CCB said that it did not make any progress in the investment into Happy Life Insurance Co., the insurance subsidiary of China Cinda Asset Management Corporation (Cinda AMC). Actually, CCB has also expressed the desire to acquire certain stake in Cinda AMC, but the deal still relies on the approval of the State Council, the country's cabinet.

As a city-level lender, Bank of Beijing has not become the new shareholder of ING Capital Life Insurance Company Limited, a joint venture between Beijing Capital Group Co. and ING. The foreign group ING at the same time is the foreign strategic investor of Bank of Beijing. Actually, ING Capital Life did not run well due to the inharmonious relation between Capital Group and ING. Therefore, Bank of Beijing is believed to take the place of Capital Group sooner or later.

However, the relation between banks and insurers is not simple. Some insurers, like China Life Insurance Co. (2628.HK, 601628.SH), are brewing investment into commercial banks, like Agricultural Bank of China and China Development Bank.

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