11/02/12, 22:17:41 EST

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Shin Kong, Airline Form Venture

wsj.com

Shin Kong Financial Holding Co.'s life-insurance unit will set up a 500 million yuan, or roughly $65 million, joint venture with China's Hainan Airlines Co. in Beijing.

Shin Kong Life Insurance Co. will be the latest Taiwanese insurer to expand overseas, as the island's life-insurance companies seek to counteract slow premium income growth in the saturated Taiwan market.

Chinese regulators have given approval for Hainan Airlines to set up the 50-50 venture, Hainan Chairman Chen Feng said on the sidelines of 17th Communist Party Congress in Beijing.

Shin Kong Life submitted an application for the venture to the China Insurance Regulatory Commission early this year.

Shin Kong Life is Taiwan's No. 3 life insurer by premium income. Hainan Airlines, partly owned by financier George Soros, is one of China's four biggest airlines.

Taiwanese life-insurance premiums grew 6.3% last year, less than half China's 13.9% growth, according to Swiss Reinsurance Co.

Premium income as a percentage of gross domestic product in Taiwan was 11.6% last year, making Taiwan's insurance-penetration rate No. 3 world-wide, after the U.K. and South Africa. China had a 1.7% penetration rate, according to Swiss Re.

Mr. Chen said Hainan Airlines' passengers would be potential customers of the joint venture, which will also sell airplane insurance, passenger accident insurance and insurance for airport equipment.

Cathay Life Insurance Co., Taiwan's largest life insurer, obtained China's regulatory approval in April 2004 to set up a Shanghai-based joint venture with the China Eastern Airlines Group valued at 800 million yuan.

Mr. Chen said the venture with Shin Kong Life is likely to begin operations in early 2008. He said he will be chairman of the new company.

Deloitte & Touche Tohmatsu International, Shin Kong's auditor, is advising the company on the transaction, a Shin Kong spokesman said Friday.

Separately, HNA Group, the parent of Hainan Airlines Co., is likely to complete its restructuring by year end, ahead of an overseas listing of some assets, Mr. Chen said. The restructuring will form a flagship carrier by merging four of HNA's major airlines, he said, as part of the carrier's effort to expand its network amid intensified competition in China's enormous aviation industry.

 Printable Version  | published Oct 22, 2007