AIA & Bank Of East Asia

AIA Group is nearing a deal to buy the life insurance unit of Bank of East Asia, the Hong Kong-based lender whose shareholders include American billionaire hedge fund manager Paul Singer's Elliott Management Corp. The insurance giant has emerged as the likely buyer for the assets. A deal could be valued at about US$600 million (S$807.6 million) to US$700 million.

A sale would be part of Bank of East Asia's efforts to boost profitability and lift its shares. The lender in September last year kicked off a process of divesting its life insurance unit and had attracted bidders including China Strategic Holdings, an investment firm backed by billionaire Henry Cheng. 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 and Bank of China. In 2009, China Merchants Bank bought Wing Lung Bank for about HK$17 billion (S$2.95 billion), while state-backed Yue Xiu Group completed acquiring a majority stake in Chong Hing Bank in 2014.

BEA Life, 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 per cent increase in BEA's commission income from sales of life products.