Cathay to set up property insurer in Shanghai

Cathay Financial Holding Co (國泰金控) is poised to become the first Taiwanese conglomerate to operate a non-life insurance business in China after Taiwan's Investment Commission gave the go-ahead to its subsidiaries' application on Tuesday.

Cathay Life Insurance Co (國泰人壽) and Cathay Century Insurance Co (國泰世紀產險), the life insurance and property subsidiaries of the nation's largest financial group, will jointly invest 400 million yuan (US$53.2 million) to set up a property insurance subsidiary in Shanghai.

China's Insurance Regulatory Commission already approved the two companies' application last Friday.

Although the Shanghai firm would be a 50-50 joint venture between Cathay Life and Cathay Century, the latter would be the main operator of the Chinese subsidiary.

Whether the new investment will be a profit earner for the financial group or not depends on its business strategy, Vincent Chang (張進森), an analyst at Goldman Sachs, said by telephone.

Despite running the nation's largest life insurance company, Cathay Financial's non-life insurance business only ranked No. 4 in Taiwan -- after Fubon Insurance Co (富邦產險), Mingtai Fire and Marine Insurance Co (明台產險) and Shin Kong Insurance Co (新光產險).

For the first half of this year, Cathay Century Insurance earned NT$700 million (US$21.47 million), accounting for 3.3 percent of the financial group's net income.

Shares of Cathay Financial declined 0.49 percent to NT$80.6 yesterday. The commission's approval was announced after the stock market closed.

Shares of rival Shin Kong Financial Holding Co (新光金控) rose 0.34 percent to NT$29.90 on news that its life insurance unit had obtained the Chinese government's go-ahead to establish a life insurance joint venture.

Shin Kong Financial spokesman Victor Hsu (許澎) said by telephone yesterday that the company had not yet received formal notice of the the approval.

Shin Kong Life Insurance Co (新光人壽) is collaborating with Chinese carrier Hainan Airlines Co (海南航空) to tap the Chinese market, with each holding a 50 percent stake in the 800 million yuan venture.