MetLife Combines Life Joint Ventures in China as It Seeks Further Asia-Pacific Growth

While U.S.-based MetLife Inc. [058175] pursues its acquisition of American Life Insurance Co. [006081] from American International Group Inc. [058702], its Chinese team has been conducting an ongoing business integration of its two domestic life insurance joint ventures, aiming to accelerate domestic market growth and create a stronger brand.

"MetLife is always reviewing opportunities for growth and expansion through mergers and acquisitions. China is one of the most important strategic markets for MetLife, and we are open to all opportunities to grow our business in China, but do not have any plans at this time for listing in the Chinese market," Brad Bodell, vice president of MetLife International, told BestWeek Asia/Pacific.

"Our two JVs in China -- Sino-U.S. MetLife and United MetLife -- are growth operations for MetLife," said Bodell. "We are optimistic and confident about the growth prospects of the Chinese insurance market though we do not provide growth projections for our country operations. However, we have a long-term vision and ambitious business plans to strengthen our presence here."

Beijing-based Sino-U.S. MetLife Insurance Co. Ltd., a 50-50 joint venture between MetLife and China's Capital Airports Holding Co., was established in 2003. It provides life, health and accident insurance solutions in Beijing, Chongqing, Guangzhou, Shenzhen, Liaoning and Dalian through agents, bancassurance, direct marketing and group channels.

Shanghai-based United MetLife Insurance Co. Ltd., another 50-50 joint venture between MetLife and China's Shanghai Alliance Investment Ltd., was incorporated in 2005 with registered capital of 500 million yuan (US$73 million). It offers life, health and accident insurance products in Shanghai, Jiangsu, Zhejiang and Ningbo through agents, bancassurance and direct marketing channels. It has also received preparatory licenses to establish operations in Sichuan and Suzhou.

Equity Transaction

In February 2010, the China Insurance Regulatory Commission gave preliminary approval for Capital Airports to transfer all of its equity interest in Sino-U.S. MetLife to Shanghai Alliance Investment.

Shanghai Alliance Investment is a wholly state-owned investment company under the State-Owned Assets Supervision and Administration Commission of China and was founded in 1994. The company aims to expand the investment sector in China with emphasis on financial services and high-tech industries. It also provides services for large corporations, groups and state-owned enterprises for their strategic reorganization and resources allocation optimization through its expertise in capital circulation.

The parties involved did not disclose financial terms of the equity transfer. MetLife said after considering several options, management believes this move is "in the best interest" of all concerned parties.

Following the transaction, Shanghai Alliance Investment will become the Chinese shareholder of Sino-U.S. MetLife, as well as the sole life joint venture partner of MetLife in China.

"By having a single partner across the country, we can create a stronger brand and portfolio of offerings for the market. This will allow us to accelerate growth and in turn provide increased value to our customers," said Bodell.

Following the completion of the equity transfer process and subject to regulatory approvals, MetLife and Shanghai Alliance are planning to "integrate the two joint ventures, consolidate resources and maximize their competitive strengths in China," said MetLife.

"The combination of two JV companies has never occurred in China," said Bodell. MetLife's priority is to work closely with its partners, Shanghai Alliance, Capital Airports and the CIRC to complete the equity transfer smoothly. It will then begin the process of integration.

"We believe the combination of the two companies will build a bigger and stronger entity that will position MetLife for further growth, which has also demonstrated the insurer's long-term growth strategy in China," said Bodell.

MetLife's move also satisfies Chinese regulations banning a single insurance holding company or insurance group from having controlling interests in more than one insurer operating in the same business line in mainland China (BestWire, March 17, 2010).

MetLife's move contrast with ING Groep N.V. [085144], which also had two life joint ventures in China before February, but will focus more on bank-insurer partnerships in the future. ING sold its 50% stake in one of its Chinese joint ventures -- Pacific Antai Life -- to China Construction Bank in December 2009 and changed the Chinese business partner in its other joint venture -- ING Capital Life -- after Bank of Beijing invested 681.8 million yuan to acquire a 50% stake in the insurer from Beijing Capital Group in February.

Business Plan

MetLife's business strategy "will remain the same in China" following the equity transfer, said Bodell. MetLife will also standardize the company name following completion of the equity transfer.

Currently, both of MetLife's JVs are "adequately capitalized," said Bodell. Although the Chinese life insurance sector is seeing intense competition, MetLife said "we welcome competition in all markets where we do business," adding that a strong and competitive marketplace "helps strengthen the product offerings and service available to policyholders and potential customers."

By the end of 2009, Sino-U.S. MetLife ranked first in telemarketing sales for foreign insurers in China. United MetLife ranked first in annual full-year premiums for foreign insurers in the Shanghai market, according to MetLife.

Total 2009 cumulative original premium income for Sino-U.S. MetLife and United MetLife was 2.06 billion yuan and 907 million yuan, respectively.

Aside from the emerging China market, MetLife said the Asia-Pacific region is "very important" for the company.

"In the region, we have one of our oldest operations in South Korea, which has been operating for 20 years by 2010, and represents the second-largest operation for MetLife outside of the U.S.," said Bodell.

South Korea is the seventh-largest insurance market in the world, and Bodell said MetLife is "very optimistic" about growth potential in the country. In Japan, MetLife has a successful joint venture with Mitsui Sumitomo Bank and is a leader in the variable annuity market, he added.

"We are also very optimistic about our other markets in Asia-Pacific, including Taiwan, Hong Kong and Australia," noted Bodell.

As of Dec. 31, 2009, MetLife's Asia-Pacific region had full-year operating earnings of US$254 million.

The company said it looks for opportunities to grow and strengthen its business in every country where it operates. "We just announced an agreement with AIG to acquire Alico and will be working on our plans for integrating the business into MetLife," Bodell said.

(By Rebecca Ng, Hong Kong news editor: [email protected])