AIA expands in Australasia with $3bn cash acquisition

Pan-Asian life insurance group AIA said on Sept. 21 that it reached an agreement with the Commonwealth Bank of Australia to acquire CommInsure Life and Sovereign, CBA’s life insurance business in Australia and life and health insurance businesses in New Zealand.

In addition, AIA will enter into a 20-year strategic bancassurance partnerships with CBA in Australia and ASB Bank in New Zealand.

The gross consideration to be paid with respect to the transaction is AUD3.80 billion ($3.04 billion) payable in cash on completion of the transaction and subject to certain adjustments at completion. After taking into account the proceeds from reinsurance agreements, and the free surplus within CommInsure Life and Sovereign, the final net cash outlay by AIA is expected to be AUD1.88 billion ($1.50 billion). The aggregate gross embedded value of CommInsure Life and Sovereign was AUD 3.53 billion ($2.82 billion) as at June 30.

Ng Keng Hooi, AIA CEO said: “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.”

Through the deal, AIA will become the number one ranked life insurance provider in both Australia and New Zealand’s individual life protection markets, according to the statement.
Australia has the largest life protection market in the Asia-Pacific region ex-Japan. It also has relatively low life insurance penetration and a mortality protection gap estimated at $1.1 trillion.

The parties are working towards completion of the deal during 2018. The transaction is subject to securing all necessary regulatory and governmental approvals.

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