CBA offloads life insurance for $3.8b

Ross Houston
September 21, 2017

The sale is a quick turnaround for Australia's biggest lender, which touted the exit of its life insurance businesses last month after the units attracted potential buyers.

CBA has announced it has divested its life insurance businesses, CommInsure and Sovereign (New Zealand), to AIA Group for $3.8 billion.

For pure-play global insurers including AIA, MetLife and Zurich Insurance Group AG, Australia is an attractive market with relatively low life-insurance penetration.

Commenting on the transaction, CBA CEO Ian Narev said: "We have said for some time that while distributing life insurance is a fundamental part of that strategy, we were open to different models for doing so".

AIA group chief executive Ng Keng Hooi said the acquisition and 20-year partnership would "strengthen AIA's protection market leadership and expand our distribution capabilities in these markets".

"CBA has done well selling CommInsure on a good multiple", Shaw and Partners analyst David Spotswood said in a note to clients, adding it gave the bank "flexibility" in the event of hefty fines stemming from the money-laundering civil case.

CBA's share price was 0.49 percent higher at Aus$76.66 in morning trade.

FILE PHOTO: A bird flies over AIA Tower, named after American International Assurance Co (AIA), in Hong Kong February 27, 2009.

The parties are working towards completion during 2018. CMLA, Sovereign and ASB are each wholly owned subsidiaries of CBA.

The deal included a 20-year right for CBA to distribute the pan-Asian life insurance firm's products in Australia and New Zealand, with customers retaining their current benefits under existing policies.

AIA, one of the largest insurers in Asia, has operations in 18 markets in Asia-Pacific including Hong Kong, Thailand, Singapore, Malaysia, China and South Korea.

The deal is AIA's second-biggest acquisition since it listed in Hong Kong in 2010.

CBA's wealth management group executive, Annabel Spring, will oversee the divestment and strategic review until she leaves the bank in December.

AIA said that when reinsurance agreements and the free surplus of the acquired unit, CommInsure Life and Sovereign, were taken into account, the final net cash outlay would be A$1.88 billion (US$1.5 billion).

In a separate announcement, the bank has also indicated it will commence a strategic review of asset management business Colonial First State (CFS), and will consider a range of options for the business, including an IPO.

Other reports by iNewsToday