Hyundai Marine & Fire Insurance China Subsidiary Completes Paid-in Capital Increase... Foundation for Business Expansion

[Asia Economy Reporter Oh Hyung-gil] Hyundai Marine & Fire Insurance's Chinese subsidiary has recently completed a paid-in capital increase, laying the groundwork for expanding its local business. Although its market share in the rapidly growing Chinese non-life insurance market remains minimal, the company plans to find a breakthrough for growth in the Chinese market based on the increased capital.

According to the insurance industry on the 6th, the China Banking and Insurance Regulatory Commission recently gave final approval to the equity change plan through a paid-in capital increase applied for by Hyundai Marine & Fire Insurance's Chinese subsidiary, Hyundai Property Insurance Co., Ltd.

Hyundai Property Insurance signed new joint venture agreements last July with four local Chinese IT companies. These include Legend Holdings, the parent company of Lenovo, China's top computer manufacturer; Didi Chuxing, a car-sharing company; Yeshang Digital, an e-commerce company; and Hong Sam Yo Seong, a consulting firm.

With the approval from Chinese authorities, Hyundai Marine & Fire Insurance's subsidiary changed from a 100% wholly owned company to a joint venture. Hyundai Property Insurance's capital increased from 550 million yuan (approximately 95 billion KRW) to 1.67 billion yuan (approximately 290 billion KRW). Hyundai Marine & Fire Insurance's stake decreased from 100% to 33%, while Lenovo and Dilyun Technology Co., Ltd. (a Didi Chuxing subsidiary) each acquired 32%. Yeshang Digital and Hong Sam Yo Seong each obtained 1.5%.

Established in 2007, Hyundai Property Insurance is located in Beijing and Qingdao, Shandong Province. It sells new general household insurance products including automobile insurance, leisure, and travel insurance. Last year, its earned premiums in the Chinese market amounted to 197 million yuan, equivalent to 34 billion KRW. Net profit recorded was 16.08 million yuan (2.7 billion KRW).

The Chinese non-life insurance market size reached 1.3016 trillion yuan (226 trillion KRW) in earned premiums last year, having grown more than 60% over the past five years. With rising incomes due to economic growth, automobiles have become widespread, and as car sales increase, the automobile insurance market is also expanding.

There are as many as 87 companies competing, including 65 local insurers and 22 foreign-capital firms. Among them, Hyundai Property Insurance's market share is 1.9% among foreign insurers, which is still a modest scale.

Hyundai Property Insurance has pursued a conservative business policy focused on stable loss ratios for automobile insurance. The automobile insurance loss ratios were 72.3% in 2017, 83.6% in 2018, and 81.8% in 2019, maintaining a stable level.

However, this capital increase is expected to provide opportunities to differentiate products and services as well as technical agreements with local IT companies. In particular, if insurance subscriptions for shared vehicles of Didi Chuxing, known as the "Chinese Uber," continue, an increase in earned premiums is also anticipated.

A Hyundai Marine & Fire Insurance official said, "We pursued a contract for equity participation by Chinese companies as new joint venture partners to expand business expectations in the Chinese insurance market and promote insurtech," adding, "We expect synergy effects with local partners strong in the IT field."

[Image source=Yonhap News]