Commonwealth Bank has agreed to sell its life insurance operations to Asia’s AIA for $3.8 billion and is now looking at offloading its global asset management business.
The sale of CommInsure Life and NZ-equivalent Sovereign – which CBA flagged last month when it announced a $9.9 billion annual profit – includes a 20-year deal for CBA to distribute AIA life insurance products in Australia and New Zealand.
The deal does not include general insurance and CBA will continue to use the CommInsure brand, earning income on the distribution of life and health insurance.
Commonwealth Bank chief executive Ian Narev said the lender remained committed to providing high quality products.
“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,” Mr Narev said on Thursday.
“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.”
Next on the chopping block could be CBA’s Colonial First State Global Asset Management, with the lender undertaking a strategic review of the global asset manager.
CBA said its options included spinning off the business and listing it separately.
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.
That will lift CBA’s CET1 ratio by about 0.7 per cent to 10.8 per cent, above the 10.5 per cent benchmark the Australian Prudential Regulation Authority has instructed the big banks to reach by January 2020.
The sale follows similar moves by rivals ANZ and National Australia Bank to cut their exposure to wealth management.
CBA’s wealth management group executive, Annabel Spring, will oversee the divestment and strategic review until she leaves the bank in December.
Michael Venter, who is currently chief financial officer of CBA’s international financial services, has been appointed chief operating officer for wealth management and will lead the unit following Ms Spring’s departure.
CommInsure was hit by controversy in 2016 when its managers were accused of pressuring doctors to alter medical opinions so it could deny claims.
The corporate watchdog in March cleared CommInsure of the allegations but said some practices were “out of step with community expectations”.
Hong Kong-listed AIA is the largest independent publicly listed pan-Asian life insurance group and will become the market leader in both Australia and New Zealand with the purchase.
“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,” AIA chief executive and president Ng Keng Hooi said.