Cathay Financial gets nod for Chinese venture

Cathay Financial Holding Co (國泰金控), Taiwan's biggest financial services provider, won approval from regulators to become the nation's first financial company to offer insurance services in China.

Cathay Life Insurance Co (國泰人壽), Taiwan's largest life insurer and partner China Eastern Air Holding Co (中國東方航空) won approval from China's regulators on Dec. 24 to set up a venture in Shanghai, Cathay Financial said in a statement to the Taiwan Stock Exchange yesterday. The joint venture will have a registered capital of 800 million yuan (US$97 million).

The venture may apply for licenses to operate in other Chinese cities after WTO reforms take effect next year, Lee Chang-ken (李長庚), Cathay Financial's chief strategy officer and vice president, said in a telephone interview.

"We'll figure out a right strategy to explore the market," Lee said.

The Shanghai branch is expected to start operating "within weeks," he said.

Cathay Life in April obtained initial approval from Chinese authorities to form a life insurance venture with China's third-largest air carrier.

"After obtaining the license, we plan to begin the joint-venture's operation by the end of the year," Lee said at the time.

The venture will target China-based Taiwanese as its potential clientele, since Shanghai has more Taiwanese businesspeople than any other Chinese city, Lee said on April 27, adding that the venture may break even "within three to four years."

With 500 routes, China Eastern Air has NT$189.2 billion (47.3 billion yuan) in assets and 25,000 employees in 10 business units and 18 financial holding subsidiaries, which extend into nine sectors including the financial and food industries.

In a related news, Taiwanese regulators have in principle agreed to let Chinese insurance companies open offices here, and may allow access to banks and securities companies in the future, Chiu Tai-san (邱太三), vice chairman of the Mainland Affairs Council, said on Oct. 27.

As of Oct. 27, the Financial Supervisory Commission said it had given approval to five Taiwanese life insurers and nine non-life insurers to set up representative offices in China. Four applications from life insurers and five from non-life insurers have been approved by China authorities.

The commission also gave permission to three Taiwanese insurers to set up subsidiaries in China, which has yet to be approved, the commission said on Oct. 27.

Additional reporting by Joyce Huang