Australia’s biggest bank yesterday announced a major shake-up, offloading its Australian and New Zealand life insurance business to AIA Group Ltd for A$3.8 billion (US$3 billion), while reviewing the future of its global asset management arm.
Troubled lender Commonwealth Bank of Australia (CBA) is under a cloud as it faces legal action over alleged breaches of money laundering and terror financing laws, and has also been beset by a scandal over poor financial planning advice.
Its life insurance division, CommInsure Life, had also come under scrutiny over allegations of claims being denied, although the bank was later cleared by corporate watchdog the Australian Securities and Investments Commission.
CBA said the sale of CommInsure and Sovereign Assurane Co Ltd would make the Hong Kong-listed AIA the life insurance market leader in Australia and New Zealand.
The deal included a 20-year right for CBA to distribute the pan-Asian life insurance firm’s products in Australia and New Zealand, with customers retaining their current benefits under existing policies.
In a separate announcement, the bank — Australia’s largest firm by market capitalization — said it could also spin off its global asset management business.
Colonial First State Global Asset Management, which is known outside the country as First State Investments, manages about A$219 billion.
The sale to AIA, which already has insurance businesses in Australia and New Zealand, would see the lender book an after-tax loss of A$300 million, CBA chief executive Ian Narev said .
“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,” he said.
The acquisition and 20-year partnership would “strengthen AIA’s protection market leadership and expand our distribution capabilities in these markets,” AIA group chief executive Ng Keng Hooi (黃經輝) said.
AIA, the largest independent publicly listed pan-Asian life insurance group, operates in 18 markets across the Asia-Pacific region.
CBA’s move came after Australia’s financial intelligence agency, AUSTRAC, last month launched a civil case against the lender, alleging “serious and systemic non-compliance” of the laws involving thousands of transactions.
A global shareholder class action is also in the works, with the case overshadowing record annual profits of A$9.93 billion in the year to June 30.
The scandal forced the bank to announce the retirement of its chief executive, and slash pay and bonuses to top management.
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