Suncorp Group has become the latest financial institution to exit the life insurance business â€” following the lead of Commonwealth Bank, ANZ and NAB, amid intensifying regulatory scrutiny into the industry.
Australia’s second largest general insurer has signed a $725 million non-binding heads of agreement to sell its life insurance division to Japanese insurer Dai-ichi Life Holdings.
The insurer, which owns brands like AAMI, GIO and Vero, said it will sign the legally binding paperwork at the end of this month, and the deal should be complete by December 31.
Suncorp announced the deal at the same time as its full-year results â€” the key highlight being a 1.5 per cent drop in net profit to $1.06 billion, hurt by rising costs.
Its revenue also fell sharply, down 11.2 per cent to $15.45 billion, and its cash earnings are down 4.1 per cent to $1.1 billion.
The insurer will pay a fully franked dividend of 73 cents per share, plus a special dividend of 8 cents.
Suncorp’s best performing division was its New Zealand business, with profits surging 65 per cent to $135 million due to higher premiums and lower claim costs.
Its Australian insurance arm saw a much smaller profit increase, up 2.2 per cent to $739 million.
However, the profit of its banking and wealth business fell 2.8 per cent to $389 million, amid higher loan impairment expenses.
Furthermore, it expects to return $600 million to shareholders from the life insurance sale â€” which will also result in an $880 million non-cash write down to goodwill and assets.
Suncorp’s chief executive Michael Cameron said the sale will simplify the company’s business model, and “provide a significant release of capital” to shareholders.
As part of the deal, the insurer will sign a 20-year agreement to distribute the life insurance policies of TAL Dai-Ichi Life Australia, the local subsidiary of the Japanese buyer.
Suncorp stocks have jumped 5.2 per cent to $15.78 at 12:05pm AEST.