BOC Hong Kong (Holdings) has agreed to pay its parent company $900 million for a majority stake in a life insurance unit as the bank implements the first stage of its plan to become a fully fledged financial services group.
The lender said yesterday it would acquire 51 per cent of BOC Group Life Assurance, a Hong Kong company, from Bank of China in a deal that should receive shareholders' approval by early June.
BOCHK chief financial officer Raymond Lee Wing-hung said the price represented 1.8 times BOC Life's book value, or 1.3 times its appraisal value, in line with recent transactions in the sector.
BOC Life's assets amounted to $9.34 billion at the end of last year. Its profit after tax was $200 million from an income of $3.69 billion.
BOCHK deputy chief executive David Lam Yim-nam said the acquisition represented a key step in implementing the bank's strategic plan for 2006 to 2010.
He said the bank had acted as a distribution agent for BOC Life for many years, but now it could move into product manufacturing, while restructuring the bank's sales and marketing efforts.
'It can broaden our income stream and enhance our profit margin,' Mr Lam said. 'As we have a customer base of 2.5 million, there is a lot of room for developing wealth management business and life insurance is a key factor.'