AIA Group Limited (AIA) is to acquire the Commonwealth Bank of Australia’s (CBA) life insurance business in Australia and life and health (L&H) insurance business in New Zealand, CommInsure Life and Sovereign, subject to regulatory approvals.
In addition to the agreement between AIA and the CBA, the former will enter into a 20-year strategic bancassurance arrangement with CBA in Australia and ASB Bank Limited in New Zealand.
The total amount to be paid in relation to the transaction is AU$3.800 million (US$3.036 million), which is payable in cash once the deal has completed, and which is also subject to adjustments at completion.
After proceeds from reinsurance arrangements, and the free surplus within CommInsure Life and Sovereign, AIA final net cash outlay is reportedly expected to be AU$1.882 million (US$1.503 million).
The deals is expected to close sometime during 2018.
Combined, the acquisition and bancassurance deals create “attractive opportunities” for AIA, and will reportedly make it the number one provider of life insurance in Australia and New Zealand.
Australia has fairly low life insurance penetration, with a mortality protection gap of an estimated $1.1 trillion, underlining the opportunity for AIA to expand.
AIA Group Chief Executive officer (CEO) and President, Ng Keng Hooi, commented; “This transaction provides a highly-attractive opportunity to transform AIA’s businesses in Australia and New Zealand by extending our protection market leadership positions and expanding our distribution capabilities through strategic long-term partnerships with leading retail banks in these markets.
“The transaction will generate substantial financial benefits for our shareholders through enabling us to deliver further profitable new business growth by leveraging AIA’s capabilities and leading product solutions.”
“The acquisition of CBA’s life insurance businesses and the new 20-year bancassurance partnerships with CBA 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.”