Standard Life ends Bank of China talks

Standard Life's drive to accelerate the growth of its Chinese business was thrown off track yesterday when it revealed it had broken off lengthy talks with Bank of China (BoC).

The talks were to enable BoC to take a majority stake in Heng An Standard Life, a 50/50 joint venture owned by the Edinburgh-based life insurer and its local Chinese partner, Teda International.

But Standard Life said in a short stock exchange statement yesterday that "it has not proved possible for the parties to reach agreement". The talks had gone on since September 2009, but a company spokesman would not identify the stumbling blocks.

The company added: "Standard will continue to develop Heng An Standard Life in partnership with its existing joint venture partner."

A company source said later: "We were enthusiastic about the talks and so there is an element of disappointment. But we have a significant business in China that we will develop with the existing j/v."

Hopes rose for a successful outcome when Standard's chief executive, David Nish, was one of 40 leading British businessmen accompanying Prime Minister David Cameron on a visit to China in November to drum up business links between the two countries.

Analysts said yesterday that the attraction of BoC taking a majority stake in Heng An was that it would have enabled the business to be classified as a domestic insurer in the country.

That would have massively widened the j/v's access to a market that places onerous restrictions on foreign companies' activities. Currently Heng An is classified as an international insurer, which restricts the type of business it can write.

One analyst said: "The beauty of it from Standard Life's point of view was that it might have had a reduced stake in the venture but the business would have had vastly better growth prospects under BoC's wing."

Another analyst commented: "It will be a setback for Standard strategically-speaking. They were quietly confident of getting this deal done, and it would have given them a much larger customer base in China much more quickly.

"Having said that, we believe the venture is making little profit currently, if any. China and India are still more about strategic potential for British companies rather than big profit-earners now. It won't affect our numbers on the company and that's why the shares have barely reacted today."

Heng An Standard Life reported sales of 116 million in 2009, less than 1 per cent of the Scottish insurer's worldwide revenues.

The j/v, which started trading in December 2003, has a presence in 31 Chinese cities in eight provinces.It has 350,000 customers and Standard employs about 4,500 in the country.

Heng An's products range from term assurance and whole life insurance to accident and health insurance.

Standard Life revealed last month that it had seen strong growth in assets and business flows in the nine months to end-September.

The group said assets under management had risen 13 per cent in the period to 192.4bn from 170.1bn in the same period of 2009. Fee business was 14 per cent higher at 157.7bn. Net inflows across the group increased 60 per cent to 7.2bn from 4.5bn.

One analyst said yesterday: "The moderately disappointing news on China is likely to be taken by the market in the context of a strong organic performance by Standard."

Standard Life's shares closed up 1.2p at 216.7p.