Hong Kong’s BEA Presses Ahead With Life Insurance Sale

Bank of East Asia Ltd. agreed to start a process of selling its life insurance unit in a bid to boost profitability and lift its shares.

The bank, which counts activist investor Paul Singer’s Elliott Management Corp. as a shareholder, announced the plan after a business review, confirming an earlier report by Bloomberg News. BEA could raise about $500 million to $600 million from a potential transaction, people familiar with the matter have said.

BEA will also seek to enter into a long-term exclusive distribution agreement that will provide an ongoing source of revenue as a distributor of insurance products through its banking platform, it said in an exchange filing on Wednesday.

The bank said in the statement that the outlined plans “will accelerate its growth and drive shareholder value.”

Shares of BEA surged as much as 4.9% in their biggest gain since July 21. The stock closed up 1.4% on a day when the Hang Seng index in Hong Kong ended flat.

The potential disposal and partnership have drawn preliminary interest from other insurers seeking to expand in the region, people familiar said earlier. In a so-called bancassurance partnership, an insurer typically pays an upfront amount to a bank for exclusive rights to sell its products at its branches.

The bank also said it plans to focus on boosting growth at its core businesses, including via partnerships for its mainland China banking business. Other strategic priorities include raising fee-based income on wealth management and lowering the cost-to-income ratio by streamlining operations, it said.

Elliott’s Support

In March, BEA announced it had hired Goldman Sachs Group Inc. for a review of its business and assets that could lead to transactions. Elliott Management threw its support behind the process and paused court proceedings it started in 2016 against the bank and certain former and serving directors. Elliott owns about 7.5% of BEA’s shares, according to data compiled by Bloomberg.

The announcement on Wednesday was supported by Elliott Management.

“The sale of BEA Life will be a good first step and we look forward to continuing our engagement, while the company follows through on this and the other important conclusions of the review on strategic initiatives to create value for shareholders,” Jonathan Pollock, co-chief executive officer at Elliott said in a statement.

As part of the review, the 102-year-old lender was considering options including a sale of its insurance assets, Bloomberg News reported in March. Its life and general insurance as well as its pension fund business in Hong Kong could be valued at more than $1 billion in total, people familiar with the matter said at the time.

BEA Life Ltd., the bank’s wholly-owned life insurance arm, had about HK$25.4 billion ($3.3 billion) in assets as of the end of June, according to BEA’s latest financial report. BEA’s commission income from sales of BEA Life products increased by 49.2% in the first half of this year despite a drop in new premium income.

©2020 Bloomberg L.P.

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