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AIA Strengthens Its Position in Australian and New Zealand Markets

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AIA Group has reached an agreement with the Commonwealth Bank of Australia (CBA) 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 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 AUD3,800 million (which is equivalent to US$3,036 million) 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 AUD1,882 million (equivalent to US$1,503 million). The aggregate gross embedded value of CommInsure Life and Sovereign was AUD3,531 million (equivalent to US$2,821 million) as at 30 June 2017.

According to AIA, the transaction will be accretive to earnings in the first year following completion, expected during 2018. As a result of the transaction, AIA will become the clear number one ranked life insurance provider in both Australia and New Zealand’s individual life protection markets. 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 US$1.1 trillion. The acquired companies fit well with AIA’s corporate strengths and strategic priorities of achieving profitable market leadership positions in the Asia-Pacific region and will expand and strengthen AIA’s distribution capabilities and customer reach in Australia and New Zealand. CBA is the largest retail bank in Australia, and CBA’s wholly-owned subsidiary, ASB, is the second-largest retail bank in New Zealand. Together, they have a combined total of 13 million existing bank customers. The existing customer base represents a significant growth opportunity for AIA over the 20-year strategic partnerships. AIA further believes that the application of AIA’s differentiated propositions (including AIA Vitality) and rehabilitation and claims management experience will result in an enhanced customer experience and increased new business profitability over time. Finally, the acquired life insurance businesses are  complementary to AIA’s existing Australian and New Zealand businesses.

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