TAL chief executive Brett Clark.
The country’s largest life insurer, TAL Dai-ichi Life Australia (TAL) will buy ASX-listed Suncorp’s Australian life insurance business for $725 million and has entered into a 20-year distribution agreement.
As part of the arrangement, which is subject to approval in Australia and Japan, TAL will be able to sell its life insurance products through Suncorp’s distribution network, which includes digital channels, contact centres and stores.
Suncorp’s life insurance portfolio includes brands AAMI, Apia, GIO, Bingle, Vero and Asteron Life.
“Both TAL and Suncorp share a strong belief in the value of life insurance in the community and a commitment to high-quality solutions for our customers and partners,” TAL chief executive Brett Clark said. “This transaction will significantly expand TAL’s market-leading presence in Australia and will provide exciting opportunities for us with additional trusted and recognised brands, and a broader group of financial advisers.”
TAL, formerly known as Tower Australia, was bought by Japanese company Dai-ichi Life in 2010 for $1.2 billion. Its purchase of Suncorp’s life business was much speculated about and follows other large financial services companies’ exits from their capital-intensive life insurance businesses.
These include the Commonwealth Bank of Australia’s agreement in September to sell its life businesses in Australia and New Zealand to AIA Group for $3.8 billion, and ANZ’s offloading its life business to Zurich Insurance Group for $2.85 billion.
At the time of the CBA deal, industry observers said that once it was finalised, AIA Australia would become the country’s largest life insurer. Sources now say it is “too early to tell” if the Suncorp deal will allow TAL to maintain the pole position instead.
But based on NMG’s March 2018 market report on inforce premiums by manufacturer and segment, TAL and Suncorp’s total inforce premiums would amount to inforce annual premium revenue of $3.8 billion- and make it the largest life insurer in market.
In addition, in the market characterised by group and individual life insurance business, TAL and Suncorp’s total individual annual premium revenue will amount to $2 billionn, making it the largest individual life insurer in the market.
Suncorp anticipates returning about $600 million to shareholders following the completion of the transaction, which is expected by December 31, 2018.
Under the terms of the proposed strategic alliance, Suncorp will continue to earn income on the distribution of life insurance. Suncorp chief executive Michael Cameron said the sale of the life company would simplify the company’s business model.
“The long-term strategic alliance between TAL and Suncorp will allow us to offer excellent value to Suncorp’s Australian customers,” Cameron said. “The strategic alliance will leverage the strengths of our respective organisations to deliver a superior customer experience.”
For more on life insurance, register for the Investment Magazine Group Insurance Summit, the largest annual forum exploring the insurance trends affecting industry super funds, on August 28, 2018, at the Four Seasons, Sydney.