AIA extends role in Australian, NZ life-insurance markets

AIA extends role in Australian, NZ life-insurance markets”

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.

Commonwealth Bank (ASX:CBA) has announced the sale of the Australian and New Zealand arms of its life insurance business, Comminsure Life and Sovereign, to AIA Group for $3.8 billion.

Keng Hooi Ng, chief executive and president of AIA Group, added: "The acquisition of CBA's life insurance businesses and the new 20-year bancassurance partnership with CBA will strengthen AIA's protection market leadership and expand our distribution capabilities in these markets".

CBA had said it planned to sell its life insurance unit, CommInsure, after a scandal in which it was accused of using outdated medical definitions to justify withholding payments to policyholders.

Ian Narev, CBA's chief executive, 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".

CBA also said it was considering spinning off asset management business Colonial First State Global Asset Management in an initial public offering.

The life insurance sale will be recorded as a loss of about $300 million for CBA, but will release approximately $3 billion of common equity tier 1 capital.

Australia's banking regulator has imposed tougher prudential requirements on lenders, prompting them to beef up their balance sheets in recent years.

AIA said in a separate statement the final net cash outflow for the CBA transaction would be about US$1.5 billion after taking into account the proceeds from reinsurance agreements and the free surplus within CommInsure Life and Sovereign.

CBA shares closed down 45¢ to $76.24 today.

The sale follows similar moves by rivals ANZ and National Australia Bank to cut their exposure to wealth management.

Michael Venter, who is now chief financial officer of CBA's global financial services, has been appointed chief operating officer for wealth management and will lead the unit following Ms Spring's departure.

Its life insurance division, CommInsure, had also come under scrutiny over allegations of claims being denied, although the bank was later cleared by corporate watchdog ASIC.

The transaction is expected to be completed in 2018, and make AIA the biggest life insurer in both Australia and New Zealand.

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