China:AIA to buy 24.99% stake in China Post Life for US$1.86bn

AIA Group (AIA) has agreed to invest CNY12.03bn ($1.86bn) in a 24.99% equity stake, post investment, in China Post Life Insurance, the Hong Kong-headquartered regional insurer disclosed in a statement yesterday.

The investment, to be made through AIA's wholly-owned subsidiary, AIA Company, will be financed on an all-cash basis from internal resources. The deal is subject to regulatory approvals. The total value of the proposed investment represents a valuation of 1.34x China Post Life book value on a pre-money basis as of 31 December 2020. Value of new business (VONB) for China Post Life was CNY1,866m for the full year 2020.

AIA says that the investment in China Post Life will increase the Group’s exposure to the growth opportunities in the Chinese life insurance market and enable AIA to capture the significant value available from distribution channels and customer segments that are complementary to its existing strategy in China. The Group’s operations of AIA China will remain entirely independent of this investment.

China Post Life

China Post Life is a subsidiary of China Post Group and is a leading bank-affiliated life insurer. Through its distribution partnership with Postal Savings Bank of China (PSBC), it has access to the largest retail financial distribution network of around 40,000 financial outlets nationwide and more than 600m retail customers. China Post Life currently distributes in 21 provinces, covering 80% of the PSBC network.

China Post Life also has a unique operating structure and platform for distribution and customer servicing, using China Post’s infrastructure and resources. This distinctive model is an important competitive advantage and enables profitable growth at scale with market-leading efficiency.

Cooperation

AIA brings its extensive life insurance expertise and proven track record in Asian distribution partnerships to support the acceleration of China Post Life’s strategic priorities to grow its share of distribution through PSBC and move towards long-term savings with protection products to meet the evolving needs of Chinese customers.

A dedicated joint team comprising representatives from AIA Group Office and China Post Life will form the Technical Assistance Advisory Committee reporting directly to the board of directors of China Post Life. Areas of technical support and cooperation will include product development, technology, investment and risk management expertise, as well as support in expanding and deepening China Post Life’s unique distribution opportunity. AIA will have the right to nominate one non-executive director to China Post Life’s board of directors.

AIA and China Post have also entered into a Business Cooperation Framework Agreement to explore additional business opportunities.

'Right model'

Mr Lee Yuan Siong, AIA’s group chief executive and president, said, “The Chinese insurance market is already the second-largest in the world with immense long-term growth opportunities given the protection gap of more than $40tn. This unique investment in China Post Life enables AIA to capture additional areas of growth and benefit from the substantial potential for value creation.

“The strong and aligned relationship between China Post Life and China Post is the right model at the right time for successful partnership distribution in China. AIA’s proven track record makes us the ideal investor to help China Post Life build on their success and deliver long-term, sustainable VONB growth.” Ms Dang Xiurong, Party secretary and chairwoman of China Post Life, said, “AIA is globally recognised as the leading pan-Asian life and health insurer with an outstanding track record of delivering value creation for shareholders since its IPO in 2010.

“China Post Life has a rare opportunity as one of the fastest-growing life insurers in China. Our unique operating model and the largest retail financial distribution network are distinctive competitive advantages and the cornerstones of our strategic ambitions.

“We are confident that with the support of AIA’s unrivalled experience, we will advance our strategic priorities and bring financial protection to the under-penetrated mass and emerging mass-affluent market at pace, while capturing the significant potential for further growth and sustainable value creation.”

Source: Asia Insurance Review