AIA gets passive-aggressive in China

A ferry sails at Victoria Harbour in front of the financial Central district in Hong Kong
A ferry sails at Victoria Harbour in front of the financial Central district, featuring AIA Central (C) and Cheung Kong Center behind it, in Hong Kong, China February 17, 2016. Picture taken February 17, 2016. REUTERS/Bobby Yip - GF10000319448

HONG KONG, June 30 (Reuters Breakingviews) - AIA (1299.HK) is being passively aggressive. The $150 billion Hong Kong-listed insurer unveiled plans to buy read more a 25% stake in a subsidiary of China’s postal service for $1.9 billion. The deal values China Post Life Insurance at about 1.3 times book value, a discount to rival China Life (601628.SS), (2628.HK).

It’s a slightly odd investment. The target competes with AIA’s independent mainland subsidiary in some areas, and this joint venture won’t give AIA any control. Such JVs are often roiled by conflicts of interest and disagreements over strategy. Operationally it will do more for China Post than AIA.

But of all the country’s financial areas opening to foreign competition, insurance may be the slowest to relax. Overseas brands have less than 3% of the market. It might be easier for AIA simply to ride on China Post’s coattails as it taps rising wealth in more rural regions, where a massive branch network gives it an edge. Sometimes passivity is a smart hedge. (By Pete Sweeney)

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Editing by Jeffrey Goldfarb and Katrina Hamlin

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