Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Psst... want a frothy sale price?

Sell a Hong Kong insurance asset, but do it quick, before Chinese regulators cotton on to mainland firms paying over the odds for the best yuan hedge around.

Take Hong Kong Life Insurance Ltd., a small firm that an investment company associated with China UCF Group Co., the conglomerate led by businessman Zhang Zhenxin, has purchased for HK$7.1 billion ($914 million). That's nine times book value, according to Bloomberg Intelligence analyst Steven Lam.

It's also well above previous heady sales in the sector. When Fujian Thai Hot Investment Co. agreed to pay $1.4 billion for Dah Sing Financial Holdings Ltd.'s insurance plus bancassurance operations last June it was effectively forking out five times book value. Private equity firm JD Capital Management LLC offered 2.4 times book when it acquired Ageas's operations in Hong Kong in 2015.

Hong Kong Life's price tag is particularly striking when you consider how tiny it is. Its unaudited net profit after tax came in at HK$25.4 million last year, down 38 percent.

Blink and You'd Miss It
Hong Kong Life is the 10th largest insurer by new annual premium equivalents in the city, but it only has a 1.7 percent market share
Source: Bloomberg Intelligence, Hong Kong Office of the Commissioner of Insurance
Note: Annual premium equivalent is a measure of life insurance sales.

Equally curious are the terms UCF has agreed to in order to win over Hong Kong Life's current owners. UCF is offering to distribute Hong Kong Life's policies on a non-exclusive basis through most of the branch networks of its controlling banks. In other words, some of Hong Kong Life's current owners aren't committing to sell only Hong Kong Life products once the deal is done, something even Fujian Thai Hot sought from Dah Sing.

On top of that, UCF agreed to a reverse break fee of 10 percent of the value of the deal if the transaction collapses. That's much more than the sub-5 percent norm Chinese buyers have been consenting to for American-company deals they think may run into trouble with CFIUS, or the Committee on Foreign Investment in the U.S.  

Mainland investors are desperate for dollar hedges, and insurance policies in Hong Kong are a hot commodity, despite limitations imposed by Beijing on the use of UnionPay cards to purchase them. Hong Kong Life's sale price must be intoxicating for Aviva Plc, whose insurance operations in the city are a key plank of the Friends Provident International unit it has put on the block.

The spoiler of this party may, as ever, be Chinese regulators, who are making life increasingly difficult for companies wanting to use mainland money for acquisitions abroad. Thai Hot's tilt at Dah Sing's unit has yet to close some eight months after it was announced, and scrutiny is only getting tighter.

But until the lights go up or China moves to a complete ban on mainland buying of Hong Kong insurance policies, expect the festivities to continue.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at