AIA Said to Near Deal for Bank of East Asia’s Life Insurer

(Bloomberg) -- AIA Group Ltd. is nearing a deal to buy the life insurance unit of Bank of East Asia Ltd., the Hong Kong-based lender whose shareholders include Paul Singer’s Elliott Management Corp., according to people familiar with the matter.

The insurance giant has emerged as the likely buyer for the assets after beating out other rivals, the people said, asking not to be identified because the matter is private. A deal could be valued at about $600 million to $700 million, the people said.

Talks are in advanced stage and an announcement could come as early as Wednesday, the people said. Negotiations could still be delayed or fall apart, they said. Representatives for AIA and Bank of East Asia declined to comment.

Shares in Bank of East Asia slipped 0.7% in early Hong Kong trading on Wednesday, while AIA fell about 1%.

A sale would be 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. As part of the sale, the Hong Kong lender will also seek a long-term exclusive distribution agreement that could provide an ongoing source of revenue.

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 ($2.2 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 57% in the past year, giving the firm a market value of about $150 billion.

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