SINGAPORE -- China's largest insurance company by market capitalization has taken its $1 billion investment fund on a buying spree.
The Ping An Insurance (Group)'s focus is clear: minority stakes in midsize to large startups, mostly in developed markets. With these positions, Ping An is buying a range of innovative capabilities that it can combine with its internal research efforts.
To learn more about the company's direction, The Nikkei Asian Review recently sat down with Jonathan Larsen, Ping An's chief innovation officer.
Q: What is your plan regarding overseas-focused investments?
A: The Ping An Global Voyager Fund is a $1 billion fund, funded entirely by Ping An, to invest in global fintech and healthcare technology companies. The objective is to access a much broader set of capabilities than we will be able to build ourselves internally, by investing in entrepreneurial companies. Today, it is frequently not the large institutions who are driving the innovation agenda, [but] small companies with new ideas and access to new technologies. The advent of mobile, cloud processing, artificial intelligence, machine learning, and the realization of those capabilities globally at scale, has transformed the way innovation can happen. Therefore, for any company, no matter how innovative you are, it is very important to have this form of outreach.
Our fund invests, in general, in medium to large startups, maybe 3 to 10 years old. Typically we will be buying 10% to 20% of that company, with investment size for direct investment at a minimum of about $10 million. We have also started investing in a couple of specialist funds who focus on early stage startups. [As for geographical reach,] the U.S. is a very important source of innovation in both fintech and health. Europe has interesting hot spots like London and Berlin. Israel has also proved to be a very important center for innovation.
Q: Ping An is the second largest shareholder of HSBC Holdings. Could this lead to some collaboration in mainland China?
A: Who knows? Of course, you know HSBC used to own 15% of Ping An, until 2012. So we have a very good relationship. We will have to see.
Q: Market expects IPO of the subsidiaries. What is your philosophy about spinning off subsidiaries?
A: We hope to list Lufax and possibly other operations over time. They are at a very different stage of development [from the parent]. They bring us enormous scale, but they are still evolving businesses. We think the dynamics of those businesses would not be fully appreciated as subsidiaries of a big company like Ping An. It's much better for them to be valued on a stand-alone basis. One argument is about value maximization, the other is capital rationing within Ping An. Being able to access from external capital allows us to do more things on more fronts, and deploy our resources efficiently.
Q: Have you seen any impact from the U.S. government trying to block merger and acquisitions by Chinese companies?
A: We haven't seen it yet. We are aware of the requirements in the U.S. but we are not looking to do M&As at this stage. We are talking about quite small minority stakes and relatively small investments. We would expect those to be below the threshold that would be concerning to the Committee on Foreign Investment in the United States.
Q: When will you enter Southeast Asia?
A: Pretty much 100% of our client franchise is in China today. We are definitely interested in international opportunities but they must be the right opportunities. We are neither interested in random expansion, nor showy acquisitions. We are interested in businesses that are basically map to and leverage our capabilities, whether it is core business knowledge like life insurance or banking or whether it is some of our technology capabilities that can be extended. We are not in a hurry. We have time on our side. We have so much growth opportunity in China and that story itself is very powerful for Ping An and will continue to be so.
Q: Is Ping An a technology company, or an insurance/financial company?
A: Ping An is a global scale financial institution that genuinely crosses the digital divide. It is able to use technology and develop technology in completely new ways that I don't think any other financial institution is capable of doing. The vast bulk of the technology we have comes from solving problems for our customers or our businesses. We have been able to commercialize a number of these solutions and make them available more broadly. When you do that, it opens up a continuing set of possibilities for creating new businesses using technologies and using data. In that sense, we are a technology company.
Before Ping An, Larsen spent 18 years at Citigroup, where he rose to global head of the company's retail banking and mortgage businesses. He has been at the leading edge of the financial services industry for the past 29 years across the Asia-Pacific region and globally. Larsen also has extensive experience in negotiating and managing partnerships as well as mergers and acquisitions.