2 big players eyeing ANZ insurance, wealth unit

Big Australian banks, like ANZ, are exiting the life insurance sector because the return on equity of around 10 per cent is lower than overall bank returns and regulators have required them to hold more capital against their higher-returning mortgage
Big Australian banks, like ANZ, are exiting the life insurance sector because the return on equity of around 10 per cent is lower than overall bank returns and regulators have required them to hold more capital against their higher-returning mortgage books.PHOTO: REUTERS

Japan's Meiji Yasuda and HK-based AIA reported to be keen on bank's $4.7b arm

SYDNEY/SINGAPORE/TOKYO • Australia and New Zealand Banking Group's sale of its life insurance and wealth business, which has been valued at US$3.33 billion (S$4.71 billion) by the bank, is attracting interest from Japan's Meiji Yasuda and Hong Kong-based AIA Group, according to people familiar with the situation.

Meiji Yasuda, Japan's third-largest private sector insurer by assets, is attracted to ANZ's wealth business as well as its life insurance arm, a source close to the unlisted Tokyo- based company said. The wealth division's relatively low-risk, fee- based superannuation business is appealing, the source said.

AIA could scale up its existing Australian business significantly if it buys the ANZ business, said two people familiar with AIA's interest. AIA's current Australian premium income is small relative to its other markets, such as Hong Kong, Singapore and Thailand.

Representatives of Meiji Yasuda and AIA declined to comment.

The ANZ assets have an embedded value of A$4.5 billion (S$4.7 billion), according to ANZ's recent results. Chief executive Shayne Elliott this month indicated that the bank was seeking a price at least that high.

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  • US$3.33b Value of Australia and New Zealand Banking Group's life insurance and wealth business, OnePath.

    10% OnePath's share of the life insurance market in Australia.

Australia is an attractive market for foreign insurers because the population and economy are growing faster than in most other developed markets and the regulatory regime is more stable than in emerging markets, analysts said.

Japan's Dai-ichi Life Holdings, Australia's largest life insurer after acquiring Tower Australia (now called TAL) for A$1.2 billion in 2011, is not interested in bidding, according to a source.

The ANZ business, called OnePath, has a 10 per cent share of the life insurance market, making it the sixth-biggest player in Australia.

The top life insurers in Australia are TAL with 17 per cent and AIA with 13 per cent, according to a TAL investor presentation in September.

ANZ's Australian insurance and wealth business reported a full-year cash profit of A$327 million for the year ended Sept 30, down 24 per cent from a year earlier, though the result was after significant restructuring and software charges.

This is the second major move by a major Australian bank to offload its insurance business. National Australia Bank sold its 80 per cent stake in its life insurance arm to Japan's Nippon Life for A$2.4 billion last month.

The big Australian banks are exiting the sector because the return on equity of around 10 per cent is lower than overall bank returns and regulators have required them to hold more capital against their higher-returning mortgage books, analysts said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 19, 2016, with the headline '2 big players eyeing ANZ insurance, wealth unit'. Print Edition | Subscribe