AXA to take full ownership of JV in China

French insurer bullish on local market, eyes middle-income group for growth

AXA is a stone's throw way from becoming China's biggest foreign-funded property and casualty (P&C) insurer once the China Banking and Insurance Regulatory Commission approves its purchase of the remaining 50 percent stake of its joint venture in AXA Tianping, industry officials said.

By taking full ownership of AXA Tianping, the Paris-headquartered French multinational insurance company will be in a strong position in the world's second largest insurance market where demand from the middle-income group earning for quality of life is rising along with consumption upgrades and digitalization, said Xavier Veyry, executive chairman and chief executive officer of AXA China.

AXA Group CEO Thomas Buberl called the deal a "first of its kind "transaction in the Chinese insurance market, which allowed the leading P&C insurer to secure a nationwide footprint.

"The acquisition further reaffirms our conviction that our operations in China will be a key growth engine of the group and in its preferred segments," said Buberl.

AXA Tianping will represent a unique platform for AXA to capture the significant growth potential of the P&C and health markets in China, the company's plan said.

"The reason we decided to go ahead with the purchase is because we believe it's the right time with the further opening of the financial sector in China. It's the right time, the right company, with the right people and the right infrastructure to be able to deploy an ambitious strategy, which is a strategy of diversification here in China," said Veyry.

AXA announced in November it had agreed with AXA Tianping Property & Casualty Insurance Co Ltd on the purchase of the latter's 50 percent stake for 4.6 billion yuan ($642 million).

Guosheng Securities analyst Ma Tingting expects the participation of foreign-backed insurance companies to bolster the competitiveness of the sector.

"It will encourage domestic companies to strengthen their services and products," said Ma, adding the further opening-up of China's insurance sector has attracted 22 foreign-funded property and casualty insurance companies by the end of July.

For the moment, 90 percent of AXA Tianping's business is motor oriented. After the acquisition, AXA Tianping will diversify its business given the transformation of the Chinese market. The company will operate in a maturing consumption market, boosted by the growing middle-income group, people's pursuit of quality life, as well as digitalization seen to boost business, Veyry explained.

"What we really want is to diversify our geographical footprint by addressing specific needs of our target customers in motor vehicles, healthcare, and lifestyle," he said.

China has seen strong compound growth of 16.9 percent in insurance revenue between 2011 and 2017. It has become the world's second largest insurance market with 11 percent of the global stake in 2017, second only to the US, an industry report from iResearch said.

Insurance revenue, though, only accounts for 4.4 percent of the nation's GDP, lower than the global average of 6.1 percent, and lagging behind 11 percent in the United Kingdom, 9.4 percent in France, 8.6 percent in Japan and 7 percent in the United States, the report said.

"China is the second largest market in the world in insurance. It's growing fast so it will become the first market of the world at some stage. We believe that there are a lot of services and products to be designed for Chinese customers and this is our ambition," Veyry said.

Health insurance is one of the most promising sectors in the industry, said Wang Weiyi, an analyst with BOC International (China) Securities.

"Given the backdrop of an aging population and the Chinese people's growing awareness of health, spending on health-related insurance soared from 158.7 billion yuan in 2014 to 544.8 billion yuan in 2018. The trend will continue as more innovative products are introduced and you have the involvement of technology as well," Wang added.

This year marks the 20th anniversary of AXA entering the Chinese market, which kicked off the joint venture AXA-Minmetals Assurance with Chinese mining firm China Minmetals Corp in 1999.AXA now operates 28 branches and 93 sub-branches in 20 regions across China.