AMP to Establish Fund JV with China Life

AMP Capital Investors will set up a joint venture with China Life Insurance Co., Ltd. (SHSE: 601628 and SEHK: 2628) in a bid to enter the rising Chinese public fund and annuity market, revealed a top executive of the Australian company.

It has inked a strategic contract with the biggest Chinese life insurer and China Life Asset Management Co., Ltd. will serve as the investment consultant. China Life confirmed talks with the Australian company but not the joint venture in an interview recently.

To establish a fund management firm is one of the strategic steps for an insurer to grow into a financial holding company, and there is no exception to insurance giants China Life and Ping An Insurance (Group) Company of China, Ltd. (SHSE: 601318 and SEHK: 2318). Both of them should be in urgent need to gain a license to be engaged in fund management and who will obtain the license first will mainly depend on related policy, said Guan Yisheng, a senior professor with Central University of Finance and Economics.

They each has their advantages. China Life is the biggest life insurer in China with market share in the domestic life insurance sector reaching about 50 percent, apart from stable operation mode and investment style. Ping An has stretched out reach to banking, securities, trust and insurance and owns internationalized operation mode and investment style. Resources of more insurers will be consolidated provided that they are allowed to establish fund management firms. Notably, they could sell fund products to insurance consumers via their banking units. In addition to premium revenue, return on investment will become another major profit source of them as their fund management units expand and investment ability strengthen.

The China Securities Regulatory Commission, the top Chinese securities regulator, has not reached an agreement with the China Insurance Regulatory Commission, the top Chinese insurance regulator and what they worry most is the internal control mechanism of such fund management firms.

Ping An submitted an application for establishing a fund management joint venture with Singapore-based United Overseas Bank last June. And according to the application, its securities unit will set up a fund management joint venture with the Singaporean bank, in which they will take a 75 percent stake and 25 percent stake, each.