AIA acquires US$1.86 billion stake in life insurance arm of China Post Group as it expands presence in the mainland

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AIA Group has announced plans to acquire a stake in the life insurance arm of the China Post Group for 12 billion yuan (US$1.86 billion) as it continues to expand its presence in mainland China.

Hong Kong’s biggest publicly traded life insurer will buy a 24.99 per cent stake in China Post Life Insurance through its wholly owned subsidiary, AIA Company, subject to regulatory approval, according to a filing to the Hong Kong stock exchange after trading hours on Tuesday.

“AIA’s investment in China Post Life is highly complementary to our strategy in China and enables the group to capture significant upside from additional distribution channels and customer segments,” said Lee Yuan Siong, group chief executive and president in a statement.

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The investment in China Post Life would enable AIA to “capture additional areas of growth and benefit from the substantial potential for value creation,” Lee said.

China Post Life, a subsidiary of China Post Group, is a bank-affiliated life insurer with a focus on the country’s mass-affluent market – people at the high-earning end of the mass market. Through its distribution partnership with the Postal Savings Bank of China, the insurer has access to a retail distribution network of around 40,000 financial outlets across the country, reaching over 600 million customers.

The value of the proposed investment represents 1.34 times the book value of China Post Life on a pre-money basis as of the end of 2020, AIA said. The value of China Post Life’s new business last year was around 1.87 billion yuan.

AIA has been actively expanding its presence in China, a key focus for the insurer. Its operations in mainland China were the largest contributor to the group’s value of new business of US$1.05 billion in the first quarter of this year, which was up 19 per cent from the same period in 2020, according to a filing.

On June 22, AIA received approval from the China Banking and Insurance Regulatory Commission (CBIRC) to begin preparations to establish a new branch in Hubei province, according to a statement.

The insurer has also launched operations at its new branch in Sichuan, following approval from the CBIRC in March.

Bank of East Asia (BEA) also said in March that it would sell its life insurance unit to AIA, the result of a strategic review prompted by an activist shareholder over the direction of the city’s largest family-owned lender.

BEA would receive HK$5.07 billion (US$653 million) in cash from the sale and become the exclusive distributor of AIA’s life insurance and long-term savings products to its retail banking customers in Hong Kong, Macau, and the nine mainland China cities in the Greater Bay Area for 15 years, according to a statement.

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