HONG KONG — AIA Group on Tuesday said it had agreed to buy a 24.99% stake in China Post Life Insurance for 12 billion yuan ($1.86 billion) to boost its exposure to the nation’s life insurance market.

“China is one of the largest life insurance markets globally and capturing the significant growth potential it offers is a core component of AIA’s strategy,” the Hong Kong-listed company said in a statement.

The deal would be financed from AIA’s own funds and its Chinese unit would remain independent, it said.

The value of new business, which measures expected profit from new premiums and is a gauge of growth, for AIA’s China unit stood at $968 million in 2020. That makes it the largest contributor to the group, according to its annual report.

The value of new business for China Post Life Insurance, which is a subsidiary of China’s postal service operator, was 1.87 billion yuan for the full year 2020, AIA said in the statement.

The transaction broadens AIA’s market reach, as China Post Life Insurance targets the mass market while AIA’s unit focuses on affluent customers. The Chinese life insurance market is the second largest in the world and had a mortality protection gap — the difference between the amount of life insurance people carry and the amount they actually need — of $41 trillion in 2020, the highest in Asia, according to Swiss Re.

AIA in October converted its business in mainland China to become the first wholly foreign-owned life insurance subsidiary in the country. China removed caps on foreign ownership in most areas of its financial sector from January last year.

China Post Life Insurance, through Postal Savings Bank of China, has access to the largest retail financial distribution network in the country, with about 40,000 financial outlets nationwide serving 600 million retail customers, according to the statement.

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