Investments

Jack Ma's Yunfeng Makes A Bid For MassMutual's Hong Kong Unit

Yunfeng Financial Group, co-founded by Alibaba’s Jack Ma, is making a $1.7-billion bid for the Hong Kong and Macau businesses of MassMutual, one of the oldest life insurers in the U.S.

According to the Wall Street Journal, Yunfeng is joining the likes of Sina — owner of China’s version of Twitter — and an investment vehicle backed by Singapore’s sovereign wealth fund on the deal.

The news comes after another China tech giant, Tencent, joined with Chinese fund Hillhouse Capital this year in a Hong Kong joint venture with the U.K’s Aviva Life Insurance, looking to shift away from distribution through banks and focus on digital channels.

But while MassMutual is big in the U.S.— $20 billion in annual premiums — it only accounts for about two percent of Hong Kong’s $45-billion insurance market. It also has a weak policy-distribution network, and its investments are mostly bonds.

Still, the deal is about getting into the insurance business without the hassle of capital regulatory commitments and years of waiting for a license. The Hong Kong market is crowded, especially with life insurers, which account for about 90 percent of all premiums. In addition, this year the city set up a more powerful independent insurance regulator that will issue rules that will raise standards and costs.

At 1.9 times book, the MassMutual bid matches the average price for Hong Kong-traded Chinese insurers. Hong Kong insurance company AIA trades at 2.5 times. And while the other bidders are putting up cash, Yunfeng plans to pay for its 60 percent stake by issuing new shares and an interest-free, single-installment U.S.-dollar note backed by a letter of credit, for around $1 billion.

News of the deal sent Yunfeng shares soaring 20 percent in early Hong Kong trading, ending 5.4 percent higher.

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