China Life-CMG seeks new partner
By Hu Yuanyuan (China Daily)
Updated: 2005-08-17 08:56

Commonwealth Bank of Australia, the foreign shareholder of China Life-CMG Assurance Co, is in talks to partner up with a large-scale Chinese enterprise since the controlling shareholder, China Life Insurance Co, has to sell its stake in the joint venture next year.

"We are in the final discussions with this Shanghai-based enterprise, and the stake swap is expected to be finished by the end of this year," said Xu Haogang, manager of the public relations department of China Life-CMG.

He declined to name the new partner as "both have the intention, but haven't reached the deal yet." But he confirmed that the new partner is not an insurer and it is a cash-rich company.

"This choice is understandable," said an analyst from China Securities. "The joint venture of two insurers will easily become problematic when the corporate culture and management philosophy of two parties clash. But this problem can be avoided by choosing a non-insurer."

Fang Zhengpei, the Shanghai representative of Shin Kong Life Insurance, Taiwan's second-largest life insurer, agreed.

Shin Kong Life Insurance is also seeking a partner in the mainland to form a joint venture, but the partner is a non-life insurer.

"If we join hands with a leading mainland life insurer, it will take us quite a long time to adapt to each other since both have its own corporate culture and development strategy," Fang said. "But with a non-life insurer as our partner, we may have a bigger say in the management, and may transfer our philosophy into this joint venture."

With a registered capital of 200 million yuan (US$24.7 million), China Life-CMG was established in Shanghai five years ago. China Life Insurance Co has a stake of 51 per cent, and Commonwealth Bank of Australia holds the remaining 49 per cent.

Despite the powerful reputation of the two investors, China Life-CMG didn't give a satisfactory performance. Four general managers alone have been replaced within five years.

The reason, some analysts believe, is that the cultural barriers between the chairman from China Life Insurance Co and the general manager from Commonwealth Bank of Australia hinder the development of China Life-CMG.

And China Life, when it floated its share in the Hong Kong bourse in December 2003, agreed to sell its stake in China Life-CMG within three years of the initial public offering to eliminate competition between the joint venture and the listed company.

But some insiders say the lacklustre performance of China Life-CMG is another reason for China Life's departure.

It is said that China Life has reached a consensus with Commonwealth, agreeing to sell one per cent to the Commonwealth Bank of Australia and then transferring the remaining 50 per cent to the Chinese party.

"China Life parting ways from China Life-CMG is a big loss for the company," a senior manager of China Life-CMG said. "The top management of this joint venture are all big names in the insurance industry. And more importantly, the intangible value of China Life should never be underestimated."

But Xu Haogang is optimistic that the new partner will definitely bring a fresh outlook to the company.

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