Zhejiang Geely Holding Group, a Chinese multinational automotive company headquartered in Hangzhou, has agreed to buy a 33.33% stake in Union P&C Insurance from Union Life Insurance, according to an announcement by the non-life insurer.
Union Life told China Banking and Insurance News that Geely’s shareholding in Union P&C is a strategic investment.
Union P&C was established in January 2015, by Union Life and Zhongfa Industrial Group. The two held 99.5% and 0.5% of the shares respectively.
If the equity transfer to Geely is approved, Union Life’s shareholding in the non-life insurer will be reduced from 99.5% to 66.17%, and it will remain the largest shareholder of the company. Zhongfa Group’s stake will remain unchanged.
The change of shareholders will take effect after approval by the Beijing Banking and Insurance Regulatory Bureau.
Union P&C has been reporting losses since its establishment. Data show that from 2015 to 2019, the insurer posted losses of CNY10.96m ($1.7m), CNY35.94m, CNY44.87m, CNY67.93m and CNY53.25m. In the first three quarters of 2020, the company lost CNY27.82m.
Union P&C relies on motor insurance for at least 90% of its total premium income at a time when comprehensive auto insurance reform has reduced premium rates and raised costs for motor insurers.
The entry of Geely is expected to help turn around Union P&C because of the automobile maker’s channels and its ability to advise on vehicle-related risks and insurance needs, for more appropriate insurance products to be designed.
Geely already has interests in the insurance sector. In February 2018, the company received an insurance agency licence.
In fact, it is not uncommon for auto companies to enter the insurance industry. In addition to Geely, Guangzhou Automobile Group and FAW Group have established their own insurance companies. In addition, insurance companies that have automobile companies as shareholders include Guoren P&C Insurance, Taishan P&C Insurance, and Beibu Gulf P&C Insurance.
Founded in 1986, Geely entered the automobile market in 1997. It bought Kuwait Investment Authority’s 9.7% stake in Mercedes-Benz parent Daimler AG for $9bn in 2018, becoming the auto giant’s largest shareholder.