Aviva has signed a deal with Tencent and Hillhouse Capital to turn its 160-year-old Hong Kong business into a digital insurer.The UK based insurance group is to sell stakes in its Hong Kong operation to Tencent, the Chinese internet company, and Hillhouse, a private equity firm, for an undisclosed sum. The resulting joint venture will focus on selling basic life insurance and investment products online in the territory.
The move comes as Aviva attempts to increase its operating profits in “mid-single digits” over the medium term. The company has highlighted Asia, which accounts for 7 per cent of group earnings, as one of its “acorn” markets offering fast growth.
“Aviva are underweight in Asia relative to the larger European players, especially Prudential,” says Andy Hughes, analyst at Macquarie.
At an investor day last year, the company said it would grow in the region by disrupting existing markets.
The Hong Kong life insurance industry is dominated by companies such as Prudential and AIA, which sell mainly through agents. Less than one per cent of Hong Kong life insurance sales are made digitally. By selling online, Aviva and its partners hope to bypass the agents and their commissions, which can be high. Some charge up to 160 per cent of the annual premium over the first five years of a 20-year policy.
The UK group’s chief executive, Mark Wilson, knows the territory well having been chief executive of AIA for four years.
Aviva’s Hong Kong business used to distribute its products via branches of DBS, a bank, but that agreement ended in 2015. In its results for that year, Aviva wrote £13m off the value of goodwill in the Hong Kong business.
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