Citigroup Chooses AIA to Sell Insurance in Asia-Pacific Branches

Dec 19, 2013 2:03 am ET

Dec. 19 (Bloomberg) -- Citigroup Inc. chose AIA Group Ltd. to sell life insurance through its branch network in 11 Asia- Pacific countries as the U.S. bank slashes the number of insurers it partners with in the region.

The exclusive 15-year agreement allows AIA, the Asia- Pacific region’s third-biggest insurer by market value, to sell products to the U.S. bank’s customers in countries from China to Australia, Citigroup and AIA said in separate statements today. The partnerships will be set up in each territory next year, Hong Kong-based AIA said.

The deal gives AIA access to holders of more than 34 million individual accounts as New York-based Citigroup replaces about 150 separate agreements across the region. While no financial details were disclosed, a person familiar with the sale told Bloomberg this month the agreement could generate as much as $20 billion in revenue, including commissions and upfront fees.

“For Citigroup, it’s revenues without expense -- basically they’re getting a new product,” said Jim Antos, a Hong Kong- based analyst at Mizuho Securities Asia Ltd. “They just need the salespeople, and they already have plenty of salespeople.”

The accord lets the companies tap a region that has a lower rate of insurance penetration than others. Some 2.6 percent of people in the Asia Pacific region have life insurance, compared with 3.65 percent in the U.S. and 8.44 percent in the U.K., according to Swiss Re AG research cited in the Citigroup statement.

The 11 markets covered by the partnership are China, Hong Kong, India, Australia, Korea, Malaysia, Indonesia, Singapore, Thailand, the Philippines and Vietnam, the companies said.

Biggest Market

Citigroup’s individual customer accounts in the Asia- Pacific region held $218 billion of assets, according to the bank’s statement. Asia accounted for 21 percent of the lender’s revenue in the three months ended September, making it Citigroup’s largest market outside North America, according to data compiled by Bloomberg.

AIA, established in Shanghai more than 90 years ago, operates in 17 markets in the region and had $147 billion of assets at the end of May, according to its statement. Thailand and Hong Kong are the company’s biggest markets, accounting for at least 20 percent of revenue in the six months to May 31, data compiled by Bloomberg show.

AIA shares rose 1.2 percent to HK$38.30 as of 2:59 p.m. in Hong Kong, taking their gain this year to 27 percent. The benchmark Hang Seng Index lost 0.2 percent today.

--Editors: Nathaniel Espino, Tomoko Yamazaki