Prudential Financial Inc. (PRU) recently announced that a 50:50 life insurance joint venture with the Chinese company Fosun International. The deal has also received the regulatory nod from China Insurance Regulatory Commission (CIRC).
The joint venture with a capital of $78 million, and will be headquartered in Shanghai. The company will become operative in the fourth quarter of 2012.
Prudential eyes the Chinese market as an attractive one with high growth rate but low insurance penetration. This motivates the company to expand its operations in the Chinese market, where life insurance grossed RMB 1.06 trillion in 2010. Prudential has been running operations in China through Beijing-based Representative Office of PICA, Everbright Pramerica Fund Management Co., Ltd. (headquartered in Shanghai), Pricoa Consulting Co., Ltd. and Pricoa Relocation Hong Kong Limited.
Apart from China, Prudential has a significant presence also in the Asia Pacific region, with a strong foothold in Japan, where it has been operating for over thirty years. About 85% of the total 2010 sales in the company’s international insurance segment came from Japan. It is a market that continues to present attractive opportunities for Prudential to succeed in protection products and increasingly address retirement needs. The acquisition of the Japanese company Star Edison, which closed on February 1, has broadened Prudential’s distribution, increased the scale of its operations, and expanded its client base by roughly 50%.
Prudential, competing closely with MetLIfe Inc. (MET) and American International Group Inc. (AIG), has one of the best business mixes in the U.S. life insurance sector, with strong positions in high margin businesses and a significant diversification. Though the company witnessed a drag on revenues in the past couple of years due to the volatile economy, it has consistently increased its revenues over the past several quarters. A right mix of business, along with strong fundamentals, has helped Prudential garner market share from weakened competitors. The company is also poised to improve its earnings faster than its peers in the upcoming years.
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