Old Mutual has put up for sale its 50% stake in a Chinese insurance joint venture, people with direct knowledge of the matter said, as part of a revamp of the Anglo-South African financial group and amid a tough market for foreign insurers in China.
Old Mutual, which is working with financial advisers on the stake sale plan, could sell its holding in the 13-year-old life insurance joint venture with Guodian Corp to one or more local firms, said the people.
The move is part of a broader Old Mutual group restructuring exercise to exit non-core and smaller operations, they said, adding there is no certainty a deal would happen and the company could end the process if the bids don’t match its expectations.
An Old Mutual spokesman declined to comment, while an email sent to Old Mutual-Guodian Life Insurance Co Ltd did not elicit an immediate response.
Despite being the world’s second-largest insurance market, restrictive ownership limits, capped at 50% for foreign life insurers, and tough local competition have weighed on foreign firms’ operations and market share in China.
Chinese firms, including China Life Insurance Co, Ping An Insurance Group Co of China and a host of mid-sized insurers dominate the local market, with foreign joint ventures owning less than a 10% share.
The restrictive ownership limit and the tough competition from local firms, many of them state-backed, have especially impacted the smaller foreign insurance joint ventures such as Old Mutual’s in China.
In 2015, Old Mutual’s share of profit in the joint venture was £2mn ($2.50mn), as per its annual report.
The venture’s insurance business income in the fourth quarter of last year rose 12% to 118.4mn yuan ($17.16mn).
Given the venture’s small size, it was not immediately possible to estimate the potential sale value of Old Mutual’s stake, the people said.
They declined to be named as they were not authorised to speak about Old Mutual’s plan, which is not public yet.
Guodian is one of China’s five major state-run power generation companies.
Old Mutual is in the midst of breaking up its business in four parts by the end of next year.
The firm aims to list or sell its emerging markets business and is sharpening focus on its sub-Saharan Africa business.
The company sold a 25% stake in its Old Mutual Asset Management business last month to China’s HNA for $446mn, after selling its Italian wealth management business last year for $297mn.
Besides China, Old Mutual’s Asia presence includes its life insurance joint venture in India with Kotak Mahindra Group.