Bank of East Asia sells life insurance unit to AIA for US$653 million in a nod to activist fund’s prodding

The sale followed a strategic review in 2020 prompted by a long-running shareholder feud with Elliott Management
AIA, BEA strike a 15-year partnership to distribute life, savings products to lender’s retail customers in the Greater Bay Area

Bank of East Asia

Chad Bray

Published: 9:10pm, 24 Mar 2021

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Bank of East Asia (BEA) said it would sell its life insurance unit to Hong Kong’s biggest publicly traded life insurer AIA Group Limited, the result of a strategic review prodded by an activist shareholder over the direction of the city’s largest family-owned lender.

BEA will receive HK$5.07 billion (US$653 million) cash from the sale and will become the exclusive distributor of AIA’s life insurance and long-term savings products to its retail banking customers in the city, in Macau, and in the nine mainland China cities in the Greater Bay Area (GBA) for 15 years, according to a statement.

A closed portfolio of life policies underwritten by Blue Cross (Asia-Pacific) Insurance Limited will also be transferred to AIA as part of the sale, expected to close by the end of the year.

“Our complementary and broad capabilities across the GBA enable AIA and BEA to build a unique partnership and harness the growth potential as the region develops”, AIA’s regional chief executive officer Jacky Chan said in a filing to the Hong Kong stock exchange.

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BEA will book a HK$1 billion profit from the sale, first announced last September following a months-long strategic review of BEA’s businesses prompted by a long-running shareholder battle with Paul Singer’s US hedge fund Elliott Management over the bank’s direction.

The century-old bank, controlled by the Li family since 1918, previously said the sale of BEA Life would enhance the value of its business, improve its financial position and enable management to focus on its core banking operations in Hong Kong and mainland China.

Brian Li Man-bun (left) and Adrian Li Man-kiu (right), Bank of East Asia’s co-CEOs. Photo: Handout

The sale was the culmination of a five-year legal battle with Elliott, put on hold last March after the Li family agreed to the strategic review with the support of New York-based Elliott, one of the world’s largest activist funds.

As part of its annual results presentation in February, the lender said its net insurance profit declined by 6.6 per cent in 2020, as revaluation gains in the debt and equity portfolios of its insurance subsidiaries did not reach highs record in the prior year and additional policy reserves were required in light of historically low interest rates.

Net premium income from whole life and annuity products grew by 9.5 times in 2020 from a year earlier, leading to an 83 per cent increase in commission income from sales of BEA Life products last year, the bank said at the time.

Part of the proceeds will be paid to shareholders following the disposal, taking into account “prevailing market conditions and regulatory expectations”, the bank said. The proceeds also will be used to support its future business development.

“AIA has an extraordinary track record in bancassurance and deep commitment to the GBA,” BEA’s co-CEOs Adrian Li Man-kiu and Brian Li Man-bun said. “We are delighted that they share our vision and recognise the opportunities presented by our franchise.”

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