AIA Group has agreed to buy a 24.99% stake in China Post Life Insurance in a deal valued at $1.86bn (CNY12bn) to tap growth opportunities in China.

AIA Group will make the investment through its wholly owned subsidiary AIA Company.

The Hong Kong-headquartered insurer said that it will fiancé the investment on an all-cash basis from internal resources.

China Post Life is a subsidiary of China Post Group with a focus on the mass and emerging mass-affluent market in the country.

China Post Life leverages its partnership with Postal Savings Bank of China (PSBC) for its product distribution.

Its product offering is currently available in 21 provinces, covering 80% of the PSBC network.

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The deal gives AIA the right to nominate one non-executive director to China Post Life’s board of directors.

AIA Group chief executive and president Lee Yuan Siong said: “This unique investment in China Post Life enables AIA to capture additional areas of growth and benefit from the substantial potential for value creation.

“The strong and aligned relationship between China Post Life and China Post is the right model at the right time for successful partnership distribution in China. AIA’s proven track record makes us the ideal investor to help China Post Life build on their success and deliver long-term, sustainable VONB growth.”

AIA said the total value of the proposed investment represents a valuation of 1.34x China Post Life book value on a pre-money basis as of 31 December 2020.

Value of new business (VONB) for China Post Life was $269m (CNY1.86bn) for the full year 2020, AIA added. 

China Post Life chairwoman and Party Secretary Dang Xiurong said: “We are delighted to welcome AIA as a strategic investor in China Post Life. AIA is globally recognised as the leading pan-Asian life and health insurer with an outstanding track record of delivering value creation for shareholders since its IPO in 2010.”

The deal is subject to regulatory approval from China Banking and Insurance Regulatory Commission.