Bank of East Asia to ride on AIA dominance in China after divesting insurance assets in partial victory for Paul Singer’s hedge fund

The proposed BEA-AIA alliance will compete with home rivals like HSBC and Standard Chartered in tapping Greater Bay Area potentials

Sale of insurance unit to AIA represents a partial victory for US hedge fund Elliott Management, whose stake in BEA has suffered a beating in past five years

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The Bank of East Asia signs a 15-year distribution deal with AIA after agreeing to sell its insurance unit in March 2021. Photo: Felix Wong

Published: 1:30pm, 28 Mar 2021Updated: 2:34pm, 28 Mar 2021

The Bank of East Asia is hoping to leverage on its network in mainland China and the region to distribute life insurance products from AIA Group to its banking clients, after a strategic decision to exit from the competitive business.

The city’s 103-year old family-run lender last week agreed to sell its unit BEA Life to AIA for HK$5.07 billion (US$653 million) cash, a culmination of years-long activism and lawsuit by Paul Singer’s New York-based hedge fund Elliott Management since 2014.

The latest sale also comes with a 15-year deal giving AIA Group the exclusive right to sell life insurance products to BEA’S personal banking customers in mainland China, Hong Kong and Macau for a fee. The banking group had US$114.1 billion of assets at the end of 2020, while AIA Group had US$326.1 billion.

“This will allow us to earn a good commission income every year,” BEA’S co-chief executive Adrian Li Man-kiu said by phone on Thursday. “It will also be a good strategic partnership” for both parties to capture the big cross-border business opportunities, he added.

Adrian Li Man-kiu (right) and Brian Li Man-bun (left) became co-chief executives of the Bank of East Asia from July 2019. Photo: Handout

The BEA-AIA partnership will challenge home rivals with a longer history of tie-up who are positioning themselves in the much heralded Greater Bay Area development. The anticipated cross-border Wealth Management Connect and Insurance Connect could be “the next big thing,” Li added.

HSBC, the biggest bank in Europe and Hong Kong, struck a similar long-term deal with AXA in 2012 after hiving off its general insurance business to the French group in 2012. Standard Chartered agreed in 2017 to sell Allianz’s general insurance products to its retail banking clients in China and the region.