AIA to Pay $650 Million for Bank of East Asia’s Life Insurer

AIA Group Ltd. has agreed to pay HK$5.07 billion ($650 million) for the life insurance unit of Bank of East Asia Ltd., the Hong Kong-based lender whose shareholders include Paul Singer’s Elliott Management Corp.

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 for 15 years, according to an exchange filing on Wednesday, confirming an earlier Bloomberg News report. AIA will also acquire a closed portfolio of life insurance policies underwritten by Blue Cross (Asia-Pacific) Insurance Ltd. The parties aim to complete the deal by the end of this year.

Shares in Bank of East Asia fell 1.8% in Hong Kong on Wednesday, while AIA dropped 3.7%. 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 is one of the few remaining family-run banks in Hong Kong as the local lenders have been squeezed by larger competitors like 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% increase in BEA’s commission income from sales of life products.

AIA traces its roots to 1919 in Shanghai when Cornelius Vander Starr began an insurance business. The Hong Kong-based company is now one of the largest pan-Asian life insurers with a presence in 18 markets including China, Thailand, Singapore, Australia. It had total assets of $326 billion as of the end of December. It shares in Hong Kong have risen 45% in the past year, giving the firm a market value of about $144 billion.

Source: Bloomberg