Major bank to divest life insurance business

In its continued efforts to offload non-core businesses, ANZ has revealed that it is selling OnePath Life to global health insurance giant Cigna Corporation for NZ$700 million (AUD$645 million), subject to regulatory approval.

The major bank forecasts a gain of approximately NZ$50 million (AUD$46 million) from the sale, raising its Level 1 and Level 2 common equity tier 1 capital ratios by 5 basis points and 13 basis points, respectively.

The agreement between the parties includes a 20-year strategic alliance that will see Cigna, which boasts having 95 million customers around the world, providing insurance solutions to ANZ’s customers.

“Under this agreement, ANZ will continue to provide life insurance to our customers, but these insurance policies will now be manufactured and managed by a world-class insurance provider in Cigna,” ANZ New Zealand CEO David Hisco said.

“This is consistent with how we provide motor vehicle, home, commercial and travel insurance using a range of specialist insurance partners.”

OnePath Life customers in New Zealand will continue to receive cover under existing policy terms.

ANZ bank also said that all of the insurance business’ staff would be offered similar positions at the bank or at Cigna.

Cigna New Zealand CEO Gail Costa said that the acquisition will enable the corporation to provide “broader solutions” and “be more agile and responsive to a larger customer base”.

Upon completion of the sale, which is expected in FY2019, ANZ will have no life insurance businesses in its portfolio in the Australian and New Zealand region.

Last December, the major bank sold its Australian life insurance business to Zurich Australia for $2.85 billion; and a few months prior, it offloaded its Australian OnePath Pensions and Investments business to wealth management firm IOOF for $975 million.

ANZ also announced this month that it would be selling its 55 per cent stake in Cambodia’s Royal Bank to Japan’s J Trust in a deal that could result in a $30 million loss.

The bank’s group executive, international, Farhan Faruqui, said at the time that the sale was in line with the bank’s efforts “to exit minority investments and partnerships to focus on [its] institutional business in Asia”.

Rival major lender Commonwealth Bank of Australia (CBA) last week announced it was selling its 37.5 per cent stake in BoComm Life Insurance, which it jointly owns with China’s Bank of Communications, to Japan’s Mitsui Sumitomo Insurance.

Upon the completion of the sale, which is worth 3.2 billion yuan (AUD$668 million), CBA said that it will record an after-tax gain of approximately $450 million, raising its common equity tier 1 capital ratio by 13 basis points.

“This transaction represents a further step in simplifying and focusing our portfolio and follows the announcement of the proposed sale of the group’s life insurance businesses in Australia and New Zealand to AIA Group, and the strategic review of the group’s life insurance business in Indonesia,” CBA CEO Matt Comyn said at the time.

Other Australian banks have similarly been offloading their insurance and wealth businesses due to lower-than-expected returns and changing regulations, with National Australia Bank (NAB) revealing earlier this month its intention to sell its wealth business, MLC, which it acquired from Lend Lease in 2000 for $4.6 billion. The transaction could be worth $3 billion, a significant drop from the price it paid.

NAB CEO Andrew Thorburn conceded in the financial services royal commission that the bank’s wealth management and financial advice divisions are exposing it to excessive complexity. This is, in turn, negatively impacting customer experience and increasing the bank’s costs, Mr Thorburn said, while contributing just 4 per cent to its total earnings.

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