Bank of East Asia Considers $1 Billion Insurance Asset Sale

(Bloomberg) -- Bank of East Asia Ltd., the Hong Kong lender that has been besieged by activist investor Paul Singer’s Elliott Management Corp., is considering options including a sale of insurance assets as part of its strategic review, according to people familiar with the matter.

BEA could seek more than $1 billion from a sale of assets including its life and general insurance as well as its pension fund business in Hong Kong, the people said, asking not to be identified because the deliberations are private. A deal for the life insurance assets could include a so-called bancassurance partnership, in which an insurer typically pays an upfront amount for exclusive rights to sell its products at bank branches, the people said.

The disposals could attract interest from global insurers seeking to expand in the region amid increasing consolidation in the industry, the people said.

Shares of BEA erased earlier losses and gained as much as 4.3% in Hong Kong on Tuesday. The stock ended the day 0.2% lower at HK$18.46.

BEA announced last week that it had hired Goldman Sachs Group Inc. for a review of its business and assets that could lead to transactions. The process is supported by Elliott Management, which has paused court proceedings it started in 2016 against the bank and certain former and serving directors. Elliott owns about 8% of its shares.

New premium income of BEA Life Ltd., the bank’s wholly-owned life insurance arm, rose by 50.8% to a record high in 2019, according to BEA’s latest earnings statement. The lender runs its general insurance business through its unit Blue Cross (Asia Pacific) Insurance Ltd., which posted double-digit growth in underwriting profit last year.

The bank has over 825,000 members with HK$27.8 billion ($3.6 billion) assets in its Hong Kong pension fund schemes, known as Mandatory Provident Fund, by the end of December.

Hong Kong life insurers could see their new annualized premiums drop more than 30% in the first quarter this year as the virus outbreak took a heavy toll on sales to mainland visitors, according to Bloomberg Intelligence analyst Steven Lam.

“Sales to local residents also got disrupted due to reduced bank branch services, fewer face-to-face meetings and that the industry is up against high-base comparison a year earlier,” Lam said in an interview.

Considerations are preliminary and BEA could still decide to keep the assets or pursue other deals, the people said. A representative for BEA declined to comment on the specific potential disposals, referring to the announcement last week.

--With assistance from Alfred Liu.

To contact the reporter on this story: Manuel Baigorri in Hong Kong at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, David Morris (News)

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