Cathay Life ties the knot with China Eastern Airlines

Cathay Life Insurance Co (國泰人壽), the nation's largest life insurer, said it plans to form a life insurance venture with China Eastern Airlines Group, tapping the distribution network of the country's third-largest carrier to enter the US$27.5 billion market.

The 800 million yuan (US$97 million) venture will be half-owned by each partner, said Wang Jianyuan, head of Cathay Life's representative office in Beijing.

The tie-up is awaiting approval from Chinese regulators, he said.

Cathay Life will gain access to the customer base of an airline that operates 179 domestic routes and has more than 40 sales offices across China.

China Eastern will be able to use Cathay Life's expertise to enter a life insurance market that's averaged 38 percent annual growth in the past four years.

"The partnership makes sense," said Tess Wang, an analyst at Yuanta Core Pacific Securities Co (元大京華證券).

"Although Cathay Life has 30 percent of Taiwan's life insurance market, it's still new to the China market," she said.

Shares of Cathay Financial Holding Co (國泰金控), the nation's largest financial services company and the parent of Cathay Life, rose 1.9 percent to NT$52.50 in Taipei. The shares have risen 42 percent this year, more than the 30 percent gain in the TAIEX.

Shares of China Eastern's Hong Kong-listed unit, China Eastern Airlines Corp., rose 0.8 percent to HK$1.32 at the midday trading break. They have gained 38 percent this year. The Shanghai-listed shares fell 1.7 percent to 4.07 yuan. They have fallen 10 percent this year, compared to a 8.1 percent gain in the Shanghai A-Share index.

China's life insurance market is drawing foreign investors as a decade of economic growth averaging more than 8 percent spurs demand for financial services.

China Life Insurance, the nation's biggest insurer, sold US$3 billion of shares overseas last week, attracting orders from individual investors in Hong Kong for 172 times the stock available. The shares surged as much as 25 percent on their Hong Kong trading debut yesterday morning, after rising 27 percent in the US on Wednesday.

Premium income for China's life insurers surged 45 percent to 305.3 billion yuan last year.

Foreign insurers have been buying stakes in Chinese insurance companies and setting up ventures with companies in other industries to get past rules that bar them from selling policies directly to Chinese citizens.

Cathay Life has operated a representative office in Beijing for two years, the minimum time required to apply for a license to open a branch. A representative office can't sell policies. The Taiwanese company has submitted an application to the China Insurance Regulatory Commission for the venture, Cathay Life's Wang said. Approval may take six months, he said.

Zhao Yunjian, an official at China Eastern, confirmed the two companies were in talks on a life insurance venture.