Dah Sing Surges on Sale of Insurance Unit for $1.4 Billion

  • Sale includes life insurance operations in Hong Kong, Macau
  • Company expects deal to close in the fourth quarter of 2016

Dah Sing Financial Holdings Ltd. shares climbed the most in almost six weeks after the Hong Kong banking group agreed to sell its life-insurance operations to Fujian Thai Hot Investment Co. for HK$10.6 billion ($1.4 billion).

Shares of Dah Sing rose 2.7 percent to HK$52.75 as of 11:41 a.m. Hong Kong time, after jumping 7.5 percent earlier. The stock gained 33 percent this year, compared with the benchmark Hang Seng Index’s 4.6 percent drop.

The sale, which is subject to regulatory and shareholder approvals, includes Dah Sing’s life-insurance businesses in Hong Kong and Macau and is expected to close in the fourth quarter, the company said in a statement Thursday. The deal also includes an agreement that allows the life-insurance businesses to sell products through Dah Sing Banking Group Ltd. and Banco Comercial de Macau for the next 15 years.

Thai Hot, a Chinese firm that invests in real estate, insurance and health care, beat out property developers and insurance companies seeking a slice of Hong Kong’s market for policies, which is benefiting from surging Chinese demand. Purchases of insurance and related investment policies by mainland visitors to Hong Kong almost doubled in the first quarter from a year earlier to HK$13.2 billion, the city’s insurance regulator reported this week.

“A lot of mainland companies, especially the real estate firms, are seeking to expand into the financial services sector,” said Edmond Law, a Hong Kong-based analyst with UOB-Kay Hian Holdings Ltd. “It’s not easy to get a license and not many takeover targets are available, that’s why Dah Sing got such a good offer.”

Country Garden Holdings Co., China Life Insurance Co., Canada’s Sun Life Financial Inc. and Chinese investment firm JD Capital were among the companies picked to submit second-round offers in April, people familiar with the matter said previously. Ageas SA said in August it will sell its Hong Kong life unit to JD Capital for HK$10.7 billion.

Dah Sing Financial, which controls one of the last independent Hong Kong banks, announced in January that it was exploring the sale of its insurance operations as it sought to unlock the value of the business.

Thai Hot Investment will pay about HK$7.8 billion of the total deal amount just for Dah Sing’s Hong Kong life business, the bank said. That’s equal to about 2.23 times the unit’s carry value as of December, which is the sum of its audited net-asset value and value of in-force long-term life business, according to Bloomberg Intelligence analyst Steven Lam.

Majority Stake

Interest in the Dah Sing unit comes even after a wave of new restrictions on policy purchases by Chinese residents that are aimed at controlling capital outflows. Such purchases allowed individuals wanting to move money abroad a convenient way around China’s foreign-exchange controls.

Thai Hot Investment, based in China’s Fujian province, owns assets in industries from real estate to insurance and health care, and is a controlling shareholder of Shenzhen-listed Thai Hot Group. The investment firm, which had more than $13 billion of assets at the end of last year, completed the acquisition of a majority stake in Newport Beach, California-based Alliance HealthCare Services Inc. in March.

Huang Qisen, chairman of Thai Hot Group, is a member of the 12th National Committee of the Chinese People’s Political Consultative Conference, according to the company’s website. Calls to Thai Hot Group seeking further comment weren’t answered.

Dah Sing said the sale won’t affect its general insurance subsidiaries.

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