Massachusetts Mutual Life Insurance Co. aims to do more with less in China through its deal for a stake in Yingda Taihe Life Insurance Co.
Other U.S. life insurers have established foreign joint ventures with Chinese companies. Under Chinese law, foreign companies can own a 49% stake in these types of ventures.
MassMutual would get a 19.9% stake in Yingda Taihe under the deal announced Tuesday and would be licensed through the Beijing company to sell products throughout China, whereas foreign joint ventures have to be licensed on a province-by-province basis.
Rodney J. Dillman, the president of MassMutual International LLC, said the ability to sell nationwide in China made the deal more attractive than the foreign joint venture option.
"We see the entire country as the real opportunity here," Dillman said in an interview Tuesday. "There are many cities in China that are underserved in terms of life insurance and annuities. We think that there are broader expansion possibilities by looking at China nationally rather than on a regional basis."
The Springfield company said it had received approval from Chinese insurance regulators to buy the 19.9% stake in Yingda Taihe, a small, two-year-old unit of the financial services company State Grid Corp. of China, also of Beijing. (Foreign companies can own no more than 20% of a domestic company in China.)
The China Insurance Regulatory Commission said MassMutual would buy 149 million new shares placed by Yingda Taihe and would have to hold the shares for at least three years.
State Grid and Yingda Taihe's other domestic shareholders would hold an 80.1% stake in the insurance company, State Grid and Yingda Taihe said, without giving a breakdown of the stakes. The price of the deal, which is expected to close this summer, was not disclosed.
Dillman said MassMutual International had been working on the deal for 18 months. "We think that in a country with 1.3 billion people, there are a lot of opportunities for us and for our partner to become one of the major insurance providers in China," he said.
"Yingda Life Insurance's objective is not only to be a leader and trusted brand in China, but to be internationally respected for the quality of its assets, services and performance," Dillman said.
MassMutual has sold life insurance products in Japan since 2000, through a joint venture in Taiwan since 2002 and in Hong Kong since 2003.
"We have a pretty strong track record in Asia," Dillman said. "The natural move for us was to get into mainland China. We believe that there are some real opportunities for growth here."
He said he thinks MassMutual's next step will be to develop joint ventures in India and South Korea.
MassMutual offers insurance, annuities, critical health-care coverage and other financial products to more than 1.9 million people. It reported insurance sales of more than $2.5 billion for 2008, assets under management of $19.8 billion and total premium of $5 billion.
