China

Zhongtian Financial Plans to Acquire Stake in Huaxia Life Insurance for RMB 31 Bln

Summary:

  • Zhongtian Financial (000540.SZ) plans to acquire a 21%-25% stake in Huaxia Life Insurance Co. for RMB 31 billion, as reported by Sohu.
  • After the deal, Zhongtian Financial will become Huaxia Life Insurance’s largest shareholder.

Why It Matters:

  • Zhongtian Financial has been aggressively expanding its interests in business sectors in the Chinese financial arena. The company has operations in funds management and the investment banking business. At the end of 2016, the firm endeavored to acquire a stake in Zhongrong Life but the deal is still under the review of the China Insurance Regulatory Commission (CIRC).
  • Huaxia Life Insurance is one of the top life insurance companies in China. During the first three quarters, the company posted RMB 76.7 billion in revenue and RMB 345 million in net profit.
  • During the same time, Zhongtian Financial posted RMB 11 billion in revenue and RMB 1.6 billion in net profit. Investors in Zhongtian Financial are concerned about the company’s liquidity and debt ratio which is 75%+. The merger with Huaxia Life Insurance will lead to a worsening financial status for Zhongtian Financial.