Insurer cites relatively cheap valuation of overseas prospects
China Life Insurance is looking for overseas acquisitions from the second quarter onwards to lift profitability, chairman Yang Chao said.
He said the Beijing-based insurer had just sent a team led by chief investment officer Liu Lefei on a two-week trip to the United States and Europe to scout for buying opportunities and do research.
'We've always had the strategic intention of investing overseas, and now the second quarter and beyond presents a good opportunity for that,' Mr Yang said yesterday in Beijing on the sidelines of the Chinese People's Political Consultative Conference. He refused to give specific targets.
Price-earnings ratios for US and European companies are now relatively cheap at about 10 times forecast earnings while China Life and other mainland companies are trading at a much higher valuation of about 40 times.
'That facilitates any future acquisitions for us,' he said.
Mr Yang said the criteria for any companies that China Life acquired would be that they lift profitability, improve the company's corporate governance and are good for the company's long-term development.
It was now easier for mainland firms to invest overseas because the subprime mortgage crisis had forced many big firms to seek fresh capital to cover their losses, he added.
Despite the slumping stock market, Mr Yang said China Life aimed to maintain last year's investment return last year.
Meanwhile, China Merchants Bank, the nation's seventh-largest bank by assets, is considering opening a branch in Europe after it opens its New York branch, according to chairman Qin Xiao, without elaborating. It won approval to open the US branch last December.
'Overseas acquisitions are a more difficult business, not because of price but because one has to negotiate for a stake that gives you control,' he said. 'For example, in the United States, you are not allowed to have more than 20 per cent of a domestic bank.'
Separately, he said the bank had applied for the China Banking Regulatory Commission's approval to invest in the insurance sector.
It plans to buy all of its parent China Merchants Group's 50 per cent holding in Cigna & CMC Life Insurance, a joint venture between US-based Cigna and the group's unit Shenzhen Dingzun Investment & Management Consulting.
Set up in late 2003, the venture was already profitable, Mr Qin said.
China previously banned banks and insurers from engaging in each other's business but in January it started to allow this on a trial basis.
Meanwhile, China Merchants Bank president Ma Weihua confirmed a South China Morning Post report that it was in talks to buy a stake in global credit-card processor Visa's US$19 billion initial public offering planned for middle of this month.