Dah Sing Financial Shares Surge on Review of Insurance Unit

  • Strategic review may lead to sale of life insurance operations
  • Dah Sing divestment could fetch more than $1 billion

Dah Sing Financial Holdings Ltd., which controls one of the last independent Hong Kong banks, jumped the most in more than six years Wednesday after the company said it’s exploring options for its life-insurance businesses.

The company is in the early stages of studying strategic alternatives for Dah Sing Life Assurance Co., as well as the life-insurance product offerings of its Hong Kong-listed unit Dah Sing Banking Group Ltd., it said in a Hong Kong exchange filing late Tuesday. The review may lead to a sale of the businesses, people with knowledge of the matter said earlier, asking not to be identified because the information is private. 

The financial group’s shares rose as much as 12 percent in Hong Kong trading on Wednesday, the biggest intraday gain since May 2009, and closed up 9.1 percent. The banking unit rose 2.3 percent, compared with a 1.1 percent gain in the benchmark Hang Seng Index.

Dah Sing Financial’s disclosure spotlights the company’s effort to maximize its value as independent Hong Kong banks attract takeover offers from Chinese firms and Singaporean lenders. A sale of Dah Sing Financial’s insurance unit could raise more than $1 billion, one of the people said. 

Investor Signal

“This is a signal that Dah Sing Financial is willing to sell the bank as long as the price is right,” Edmond Law, a Hong Kong-based analyst with UOB-Kay Hian Holdings Ltd., said by phone Wednesday. “That’s what investors have been expecting as reflected by today’s share performance.”

Dah Sing Financial is seeking a price equivalent to about two times the approximately $500 million value of the life insurer’s existing policies, known as embedded value, one person said.

There’s no certainty the review will result in a transaction, according to Tuesday’s filing. Dah Sing Financial said in an e-mailed statement Wednesday that a number of options are under consideration, and the company hasn’t set a definite timetable for completion.

Ageas Sale

In August, Ageas SA said it will sell its Hong Kong life insurance unit to China’s JD Capital for HK$10.7 billion ($1.38 billion). That’s about 1.27 times its book value at the end of June, the company said.

In a banking deal announced last month, BOC Hong Kong Holdings Ltd. said it will sell Nanyang Commercial Bank Ltd. to China Cinda Asset Management Co. for HK$68 billion. The price works out to 1.95 times its book value at the end of 2014.

A year ago, Dah Sing Banking Group was viewed as a takeover target as other independent Hong Kong banks were being snapped up by larger buyers. Yue Xiu Group, an investment arm of southern China’s Guangzhou city, completed a $1.5 billion acquisition of Chong Hing Bank Ltd. in 2014, while Singapore’s Oversea-Chinese Banking Corp. bought Wing Hang Bank Ltd. for about $5 billion.

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