Bank of East Asia sells life insurance arm to AIA for HK$5b
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Hong Kong
AIA Group Ltd has agreed to buy the life insurance unit of Bank of East Asia Ltd and ink a distribution partnership with the Hong Kong-based lender in a HK$5.07 billion (S$880 million) deal.
As part of the agreement, Bank of East Asia will distribute AIA's life and long-term savings products exclusively to its retail banking customers in Hong Kong and mainland China for 15 years, according to an exchange filing on Wednesday.
The announcement confirmed an earlier Bloomberg News report. AIA will also acquire a closed portfolio of life insurance policies underwritten by Blue Cross (Asia-Pacific) Insurance Ltd.
Bank of East Asia expects to book a profit of HK$1 billion from the disposal and plans to give part of the proceeds to shareholders, the lender said in a separate filing. The parties aim to complete the deal by the end of this year.
Shares in Bank of East Asia fell 1.8 per cent in Hong Kong on Wednesday, while AIA dropped 3.7 per cent amid a slide for the city's equities market.
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The sale is part of Bank of East Asia's efforts to boost profitability and lift its shares. The lender in September kicked off a process of divesting its life insurance unit and had attracted bidders including China Strategic Holdings Ltd, an investment firm backed by billionaire Henry Cheng, Bloomberg News reported last month.
Bank of East Asia, whose shareholders include Paul Singer's Elliott Management Corp, is one of the few remaining family-run banks in Hong Kong as the local lenders have been squeezed by larger competitors such as HSBC Holdings Plc and Bank of China Ltd.
In 2009, China Merchants Bank Co bought Wing Lung Bank Ltd. for about HK$17 billion, while state-backed Yue Xiu Group completed acquiring a majority stake in Chong Hing Bank Ltd in 2014.
BEA Life Ltd, the bank's wholly-owned life insurance arm, grew its new premium income from whole life and annuity products by 9.5 times in 2020 from a year ago, according to the bank's latest financial report. That drove an 83 per cent increase in BEA's commission income from sales of life products.
The bancassurance partnership will also allow Bank of East Asia to sell AIA products in mainland China. The lender has branches in 11 cities in the Greater Bay Area, giving it one of the most extensive branch networks among foreign banks there. BLOOMBERG
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