Hong Kong based AIA is to acquire Commonwealth Bank of Australia’s life assurance businesses throughout Australia and New Zealand for A$3.8bn (US$3bn), making it the largest life insurer in the two jurisdictions.
This is a major strengthening in the region for AIA, which already describes itself as “100% focused on Asia-Pacific”, with regional offices in 18 countries throughout the region.
Expansion throughout the region was the signature of former chief executive Mark Tucker, with aggressive growth over the past seven years, before Tucker stepped aside this year to join HSBC as chairman.
The deal is subject to regulatory approval, and does not see CBA withdraw completely from its insurance interests, with the bank signing a 20-year partnership deal with AIA to continue sell and distributing its insurance products through CBA in Australia and its New Zealand subsidiary ASB Bank.
The latter two banks have a combined customer base of 13 million to whom AIA will be able to market policies.
“At 1.1 times price-to-embedded value, the acquisition price is not that demanding,” Ning Ma, analyst at Maybank Kim Eng, told Financial Times. “Investors have actually been concerned that AIA has not been fully utilising its capital because it has a solvency ratio above 400 per cent, far higher than the regulatory requirement.”
Ng Keng Hooi hailed the deal as a “highly-attractive opportunity” to transform AIA’s businesses in Australia and New Zealand by extending its protection market leadership positions and expanding its distribution capabilities.