Office workers walk out of ING Tower in Hong Kong October 19, 2012.BOBBY YIP/Reuters
Richard Li's Pacific Century Group will use its new insurance businesses in Hong Kong, Macau and Thailand as a base for further acquisitions to create a pan-Asia challenger to the more established life and savings companies in the region.
Mr. Li on Friday agreed a $2.14-billion (U.S.) deal for ING's units in the three jurisdictions, giving PCG more than half a million customers and almost 6,000 sales agents, as the Dutch group continues a break-up forced by European regulators.
Industry experts reckon the Hong Kong business is large enough to be run as a standalone entity. But there are also other smaller insurance assets in Hong Kong and southeast Asia that could make good bolt-on acquisitions for a newly independent business, according to bankers. Mr. Li could also still buy part of ING's Japanese business, according to people familiar with those talks.
One very attractive market is Indonesia, where there are a good number of smaller, listed life insurers that do not have enough capital to pursue the growth available. "When you look at the astounding success of someone like Prudential of the U.K. in Indonesia, I think that market is likely to be among the first places they will look at," said a person familiar with PCG.
PCG said it would continue to build on the ING platform "through organic and inorganic efforts across southeast Asia, including markets such as Indonesia, the Philippines and Malaysia".
The life insurance industry in Asia is being driven by a rapidly emerging middle class and a growing need for health and assurance products in countries that mostly do not have any significant state welfare support.
"Coupling our financial services expertise and strong Asian network, with the platform potential of the Hong Kong, Macau and Thailand operations, we are confident we can . . . develop a strong regional insurance champion to reach many more [customers]," said Mr. Li, who is chairman and majority owner of PCG.
The price PCG is paying for the units amounts to just less than two times their forecast year-end book value. Mr. Li had been interested in ING's Malaysian business as well, but was outbid by AIA , which agreed last week to pay 2.2 times book value.
ING still has businesses in South Korea and Japan that it wants to sell. The Korean unit is expected to be sold to KB Financial of Korea, but final-stage talks have become drawn out over several weeks.
In Japan there is a healthy company owned life business and a riskier variable annuity division. Either Manulife or Mr. Li could end up winning the first business, according to people familiar with the process, who add that neither of those bidders finds the annuities business attractive.
Mr. Li, the son of Hong Kong's richest tycoon, Li Ka-shing, was given extra firepower for his ambitions this summer by a pledge from his billionaire father that he would back his son's business ventures with cash.
The younger tycoon has three main business interests – telecoms, property and financial services. Mr. Li in 2010 bought PineBridge Investments, a U.S.-based asset management business, from AIG following the insurance company's collapse during the global financial crisis.
HSBC advised Mr. Li on the deal while Goldman Sachs and JPMorgan advised ING.