AIA agrees to buy China Post Life stake for US$1.9b

[HONG KONG] AIA Group has agreed to acquire a stake in China Post Life Insurance for about US$1.9 billion to bolster its China expansion.

The Hong Kong-based insurance giant will buy a 24.99 per cent stake in China Post Life, subject to regulatory approvals, AIA said in a filing to the Hong Kong exchange on Tuesday.

The deal marks AIA's second this year to boost its distribution network as the world's most populous nation eases restrictions on foreign insurers. It agreed to buy the life insurance arm of Bank of East Asia in March. China Post Life, a subsidiary of China Post Group, is a bank-affiliated life insurer focusing on the mass-affluent market in China. It has access to a retail distribution network of around 40,000 financial outlets in the country and more than 600 million retail customers.

AIA is accelerating expansion in mainland China as Covid travel restrictions continue to curb sales of insurance to Chinese visitors, previously a key driver for its Hong Kong unit. Mainland China has eclipsed Hong Kong as the largest contributor of new business value for the insurer.

The value of the proposed investment represents 1.34 times China Post Life's book value on a pre-money basis as of the end of 2020, the company said. Value of new business for China Post Life was about US$269 million last year.

AIA won regulatory approval this month for a new branch in Hubei province and at the current pace of expansion its footprint could cover 70 per cent of China's life insurance market by the end of 2024, up from 46 per cent now, Bloomberg Intelligence analyst Steven Lam wrote in a June 23 note. The insurer has said it plans to expand to two new regions in China a year.

BLOOMBERG