The Commonwealth Bank has sold 100% of its Australian and New Zealand life insurance businesses to AIA Group for $3.8 billion. The sale of CommInsure Life and Sovereign also includes a 20-year bancassurance partnership with AIA for the provision of life insurance products to customers in Australia and New Zealand.
Under the agreement, CommInsure Life and Sovereign customers will hold on to all current benefits of their existing policies. They will have continued access to high quality life insurance products through CBA and life and health insurance products through New Zealand's ASB Bank, as well as AIA solutions.
Further, CBA will continue to earn income on the distribution of life and health insurance products. The sale and partnership does not encompass general insurance, meaning the CommInsure brand will be retained by CBA.
Commenting on the transaction, CBA chief executive Ian Narev said: "Providing our customers with access to high quality products and services for all their financial needs is core to our vision of securing and enhancing financial wellbeing. 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."
"The combination of AIA's leading insurance capability and scale and Commonwealth Bank's broad distribution, and our complementary values and commitment to customer focus and innovation, mean that a partnership between us will create an even better experience for our customers, in a more efficient way for our shareholders."
The sale increases AIA's position as one of the biggest life insurers in the Asia-Pacific region. AIA Group chief executive and president Ng Keng Hooi said it will "strengthen AIA's protection market leadership and expand our distribution capabilities in these markets."
"We look forward to welcoming our new customers and colleagues, and working with CBA to deliver innovative insurance products and services that meet the growing financial protection needs of customers across Australia and New Zealand," he said.
AIA added the acquired businesses are highly complementary to its existing Australian and New Zealand operations, representing a compelling financial investment that will be accretive to earnings in the first year following completion.
The sale price is a multiple of 16.9 times FY17 pro forma earnings and 1.1 times the embedded value of CommInsure and Sovereign. A pre-completion dividend is also expected to be received by CBA, subject to the timing of completion, business performance and regulatory approvals.
The divestment is anticipated to release about $3 billion of common equity tier 1 capital and result in a pro forma uplift to the banking group's FY17 CET1 ratio of about 70 basis points on an APRA basis. It is also expected to result in an indicative after tax accounting loss on sale of around $300 million, net of separation and transaction costs. CBA said this is largely due to the carrying value of goodwill.
The acquisition is subject to certain conditions and regulatory approvals in Australia and New Zealand and is also conditional upon the transfer of CBA's equity interest in BoComm Life Insurance out of CommInsure.
CBA said it is considering a range of strategic options for its stake in BoComm Life, which would require approval from the China Insurance Regulatory Commission.
AIA and CBA anticipate the acquisition process to be completed in calendar year 2018.
In further news from the Group, CBA also announced a strategic review of Colonial First State Global Asset Management, including a potential IPO, and the imminent departure of group executive, wealth management Annabel Spring.This article was first published by : https://www.financialstandard.com.au
Author: JAMIE WILLIAMSON