It will cost ICBC around 400 million yuan (US$59 million) to buy the Shanghai-based life insurer, sources said. The target insurance joint venture is half held by Cathay Financial’s Taipei subsidiary Cathay Life Insurance Co. Ltd.
ICBC Chairman Jiang Jianqing headed a delegation of 10 top corporate executives visiting Cathay Financial Chairman Tsai Hong-tu Jan. 18, signaling readiness for cooperation between the two financial giants. The meeting attracted much attention, occurring as it did soon after the financial memorandums of understanding across the Taiwan Strait took effect Jan. 16.
Meanwhile, the market is eager to learn whether they will agree for ICBC to buy 20 percent of Cathay Financial for more than US$3 billion as reported earlier. However, a presence in the financial holding company by the mainland entity will be discussed in the second stage as Taiwan regulators have yet to announce detailed rules such as ownership ceilings and purchase measures governing cross-strait ties in the bank, insurance and securities sectors.
The stake acquisition plan targeting Cathay Life Insurance Co. Ltd. (Shanghai) is subject to approval from ICBC’s board of directors and shareholders, as well as authorization from the China Banking Regulatory Commission in Beijing. Cathay Financial will also need to report the development to Taiwan’s Cabinet-level Financial Supervisory Commission.
Upon stock transfer, the Shanghai insurer will have access to all of ICBC’s distribution channels in the mainland. The deal would mark the first tie-up between a mainland bank and a Taiwanese life insurance company following relaxations by the CBRC last year that allow banks to have stake holdings in insurance firms.
Cathay Life Insurance Co. Ltd. (Shanghai), capitalized at 800 million yuan, launched operations in February 2005. It already has business licenses in eight mainland provinces or municipalities. Cathay Financial and ICBC will inject more funds into the insurer after the prospective stake transaction in order to facilitate the unit’s future operation expansions.
With the support of ICBC’s distribution channels, Cathay Financial expects the insurance joint venture to further enhance its competitiveness over rivals. (HML-THN)