AMP (ASX: AMP) has announced that its wholly owned subsidiary and funds management arm AMP Capital has formed a joint venture with a division of China’s largest insurance group China Life Insurance Company.
China Life is the 16th largest corporation in China and boasts a network of 693,000 life agents. It is also the world’s largest listed life insurance company by market capitalisation and has businesses spanning insurance, institutional investing and corporate pension management.
According to AMP’s market release, recent regulatory changes in China have created the opportunity for “insurance companies in China to establish funds management companies offering public mutual funds to retail and institutional investors.”
It’s an exciting move for AMP shareholders given the forecast 15% growth rates of China’s mutual fund industry. The industry is estimated to reach AU $0.8 trillion in assets under management this year and grow to around AU $1.5 trillion in assets under management during 2017.
AMP’s choice to partner with China Life suggests management has learnt from its past mistakes and those of fellow Australian financial service companies. For example, AMP acquired Henderson Group (ASX: HGG) in 1998 only to then spin off the fund manager in 2003 with management deciding at the time that trying to manage the Australian and UK businesses within one corporate group was not benefiting either business.
Likewise National Australia Bank’s (ASX: NAB) experiences on ventures into both the USA and UK have been fraught with troubles and remind investors that transferring a successful business model to foreign countries is no easy task.
AMP has actually had a presence in China since 1997 and a formal relationship with China Life for around eight years. For shareholders, hopefully means this is a carefully planned venture with a high likelihood of creating and not destroying shareholder value. Given the mature and slower growth nature of the Australian economy the allure and opportunities for expansion into Asia by Australian businesses is highly appealing, but not without its risks.
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Motley Fool contributor Tim McArthur owns shares in Henderson Group.