Australian AMP Buys 20% Stake In Chinese Pension Fund

Posted: October 30, 2014 in Econ 101, Society and Culture


AMP to buy landmark stake in China pension fund

Date October 30, 2014

AMP chief executive Craig Meller.AMP chief executive Craig Meller. Photo: Louise Kennerley

AMP is snapping up a 20 per cent stake in China’s largest pension group, China Life Pension Company, in a $240 million deal that will see the Australian wealth giant ramp up its exposure to one of the world’s biggest economies.

AMP, which has operated in China since 1997, will be the first foreign company globally to buy a stake in a Chinese pension company. The deal will see AMP pocket 19.99 per cent of the pension group, and tap three licences allowing end to end financial services throughout China.

China Life Pension Company sells enterprise annuities to state-owned and private companies, and is one of only five pension insurers in China. It is majority owned by listed China Life Insurance Company, a company that has held formal ties with AMP since 2005.

The latest deal will be funded by AMP’s existing surplus capital and liquidity facilities.

AMP boss Craig Meller said the transaction was an extension of the group’s strategy in China and he was “very hopeful we can beat market growth” from the investment.

The enterprise annuities sector is expected to overtake the size of the Australian employer-sponsored superannuation market by 2015, after posting 26 per cent per annum growth in the past five years. AMP is hoping the deal will also give the wealth group better access to China’s ageing population, with the 65-plus age group expected to double in the next 15 years.

The acquisition comes after AMP Capital teamed up with China Life Asset Management Company to form a joint venture in 2013.

“Having had a successful venture in funds management from last year, we look forward to sharing our expertise in corporate superannuation and investment management to help grow China Life Pension Company’s business in a market where we see significant growth potential.”

The acquisition, which is expected to settle later this year, will break even in the next two years and be earnings per share accretive from 2017.

In a note to clients, Credit Suisse analyst Andrew Adams said the acquisition’s impact in the near term is expected to be minimal. “However the acquisition gives AMP a strategic stake in a high growth market,” he said.

Daniel Toohey, insurance analyst at Morgan Stanley, said this “strategically positions AMP to play a meaningful role building the China pension market with industry leader China Life.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: