SYDNEY: Australia’s biggest bank announced a major shake-up Thursday, offloading its Australian and New Zealand life insurance business to AIA for Aus$3.8 billion (US$3.0 billion) while reviewing the future of its global asset management arm.
Troubled lender the Commonwealth Bank (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, had also come under scrutiny over allegations of claims being denied, although the bank was later cleared by corporate watchdog ASIC.
The CBA said the sale of CommInsure Life and Sovereign would make the Hong Kong-listed firm the life insurance market leader in both countries.
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 — the country’s largest firm by market capitalisation — said it could also spin off its global asset management business.
Colonial First State Global Asset Management (CFSGAM), which is known outside the country as First State
Investments, manages around Aus$219 billion.
CBA’s share price was 0.49 percent higher at Aus$76.66 in morning trade.
Chief executive Ian Narev said the sale to AIA, which already has insurance businesses in Australia and New Zealand, would see the lender book an after-tax loss of Aus$300 million.
“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.
CommInsure was hit by controversy in 2016 when its managers were accused of pressuring doctors to alter medical opinions so it could deny claims.
ASIC in March cleared it of the allegations but identified a number of areas where improvements could be made to its claims-handling processes.
AIA group chief executive Ng Keng Hooi said the acquisition and 20-year partnership would “strengthen AIA’s protection market leadership and expand our distribution capabilities in these markets”.
AIA, the largest independent publicly listed pan-Asian life insurance group, operates in 18 markets across the Asia-Pacific region.
The Commonwealth’s move follows National Australia Bank selling most of its life insurance business to Japan’s Nippon last year.
Next on the chopping block could be CBA’s asset management business, with a strategic review announced to decide what to do next.
The bank said Colonial First State Global Asset Management had “achieved significant growth, scale and diversification under Commonwealth Bank’s ownership”.
“The strategic review will consider a range of options, including an IPO,” it added, referring to an initial public offering.
“This review will consider long-term Commonwealth Bank shareholder value, including whether a separately listed CFSGAM would be better able to grow its business, serve the interests of its clients and attract and retain key personnel.”
The announcement came after Australia’s financial intelligence agency AUSTRAC last month launched a civil case against CBA, 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 Aus$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.