The Commonwealth Bank, Australia’s largest provider of insurance in superannuation, is looking to get out of the industry with the sale of its CommInsure life insurance arm.
Chief executive Ian Narev made the admission while announcing the bank’s record $9.88 billion profit on Wednesday. The bank was in discussions with potential buyers for its Australian and New Zealand life insurance businesses.
“The outcome of these discussions are still uncertain,” Mr Narev said. However recent negative publicity following a horror period when CommInsure was hit by claims of unethical and poor behaviour which included doctors being pressured to avoid claims payment and the company failing to cover claims using loopholes.
“What’s become apparent is that there is some appetite in the broader insurance world in having discussions with us and [they] are very interested in the business. What we do know is that there are people who have a view that it is a very, very good business and have a very high level of interest,” Mr Narev said.
“It would be too early yet to talk about potential prices or capital impacts. In terms of the timing in the market, I think the Australian insurance market is of a lot of interest to a lot of players. We would only sell it if we were confident we could get good value for it,” Fairfax Media reported.
“We’ll see if minds will meet on it,” he said.
Following those revelations, CommInsure lost some major contracts including mandates to provide life insurance, income protection and incapacity insurance to NGS Super, CareSuper and TWU Super in 2016.
However it subsequently picked up a mandate to provide insurance to super fund NFS, a $540 million not-for-profit fund established in 1987.The awarding of the new mandate does not make up for the three major losses, however.
TWU Super alone was a $50 million contract serving about 120,000 members in the fund which has $4.5billion in funds under management.
Australia’s largest life insurer, AMP, is restructuring its business by ramping up its reinsurance strategy in an effort to release $500 million in capital to help curb volatile earnings in a what it sees as a “challenging industry”.
AMP CEO Craig Meller said on Thursday the company had signed a new agreement with General Reinsurance Life Australia (Gen Re) to reinsure 60 per cent of policies under the National Mutual Life retail portfolio recently merged with AMP.
The two groups signed their first reinsurance deal last October and the new move builds on that
Earlier in the year losses in superannuation-linked life insurance products spurred AMP, to wielded the axe, replacing two senior executives in response to $1.3 billion in losses and write-downs.