Friday, June 4, 2004
Citi enters China's insurance market
REUTERS
SHANGHAI: Citigroup , the world's top financial services firm, has won initial approval to set up a life insurance venture with a Shanghai investment firm by early 2005, marking its foray into the booming market, an executive said.
Citigroup subsidiary Travelers Insurance Company secured approval from the China Insurance Regulatory Commission to set up a 50-50 venture with well-connected Shanghai Alliance Investment, which is controlled by the city.
They now await final government approval.
The US titan will join American International Group, HSBC, Morgan Stanley and Goldman Sachs in a market with $1.3 trillion in savings and where the government is dismantling cradle-to-grave welfare.
Citigroup had not yet decided on investment, a spokesman said. The US bank now conducts retail and wholesale banking, and is involved in credit cards.
"Citigroup's expansion into life insurance in China is part of its broader effort since 2000 to develop a strong insurance underwriting and distribution presence in Asia, Europe and Latin America," Michael Froman, chief executive of CitiInsurance, said in a statement.
Foreign companies are keen to expand their presence in China's insurance sector, which is bounding ahead on rising personal incomes and as Beijing seeks ways to plug a looming shortfall in financial support for an ageing population.
Insurance premiums grew eight per cent to 155.4 billion yuan ($18.8 billion) in the first four months of 2004, well off the 29 per cent pace recorded for all of 2003, official figures show.
Once-onerous rules for foreign insurers would be relaxed from June 15 as part of China's commitments upon joining the World Trade Organisation in 2001.
Foreign firms need to devote an initial 200 million yuan ($24.16 million) to paid-up capital. But capital requirements for additional branches would be trimmed to 20 million yuan from 50 million yuan.
Caps on ownership of domestic life insurers would also be raised to 50 per cent from 25 per cent.
AIG bought a 9.9 per cent stake in PICC Property & Casualty Company ahead of the Chinese firm's IPO last year. HSBC paid $600 million for a tenth of number-two life underwriter Ping An Insurance, which is planning a $2 billion Hong Kong IPO.
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