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Bank of East Asia presses ahead with life insurance sale

[HONG KONG] Bank of East Asia (BEA) is pressing ahead with a potential sale of its life insurance assets as the Hong Kong lender concludes a strategic review, according to people familiar with the matter.

The bank, which counts activist investor Paul Singer's Elliott Management as a shareholder, will announce the results of its nine month-long business review as soon as Wednesday, the people said. Plans presented to the BEA board include exploring a sale of its life insurance unit and a bancassurance partnership, said the people, asking not to be identified because the matter is private. BEA could raise about US$500 million to US$600 million from a potential deal, the people said.

The proposal still requires final signoff from the bank's directors, and the plans may still change, the people said. The board is scheduled to meet Wednesday morning, the people said.

Shares of BEA rose as much as 3.5 per cent in early Hong Kong trading after the Bloomberg News report. The stock climbed 1.3 per cent as of 9.39am local time.

The potential disposal and partnership have drawn preliminary interest from other insurers seeking to expand in the region, the people said. In a so-called bancassurance partnership, an insurer typically pays an upfront amount to a bank for exclusive rights to sell its products at its branches.

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A representative for BEA declined to comment.

In March, BEA announced it had hired Goldman Sachs Group for a review of its business and assets that could lead to transactions. Elliott Management threw its support behind the process and paused court proceedings it started in 2016 against the bank and certain former and serving directors. Elliott owns about 7.5 per cent of BEA's shares, according to data compiled by Bloomberg.

As part of the review, the 102-year-old lender was considering options including a sale of its insurance assets, Bloomberg News reported in March. Its life and general insurance as well as its pension fund business in Hong Kong could be valued at more than US$1 billion in total, people familiar with the matter said at the time.

BEA Life, the bank's wholly-owned life insurance arm, had about HK$25.4 billion (S$4.47 billion) in assets as of the end of June, according to BEA's latest financial report. BEA's commission income from sales of BEA Life products increased by 49.2 per cent in the first half of this year despite a drop in new premium income.

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