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 lender had earlier 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.
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 purchase of BEA Life will further entrench AIA’s commanding position. Hong Kong and mainland China each contributed 35 per cent and 21 per cent to its operating profit after tax of US$5.94 billion in 2020, its two single-largest markets.
“The many partnerships are a clear indication that banks are struggling to make good profit, particularly during economic downturns following the global financial crisis in 2008 and also in recent years during the pandemic,” said Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai.
BEA, with a large network of 140 branches in Hong Kong and mainland cities, could help AIA to expand sales, especially in the Greater Bay Area, Ng said.
The two cross-border connect schemes are potentially lucrative to Hong Kong-based banks and insurers. Sales of policies to mainland clients surged to a record HK$72.68 billion in 2016, before a clampdown soon after and a pandemic in 2020 led to a slump. Both schemes could be launched when borders are reopened.
South China Morning Post