SYDNEY (BLOOMBERG, REUTERS) - AIA Group agreed to buy Commonwealth Bank of Australia's life insurance business for A$3.8 billion (S$4.12 billion) in its largest acquisition, making the Hong Kong-based company the largest life insurer in Australia and New Zealand.
AIA will team up with Commonwealth Bank for 20 years under the deal to provide life insurance products to customers in Australia and New Zealand, the lender said in a statement on Thursday (Sept 21).
Commonwealth Bank also said it's considering a potential spin-off of its global asset management business, Colonial First State, which has A$219 billion in assets under management.
The deal is the largest acquisition by AIA, at nearly double the size of the insurer's 2012 purchase of a Malaysian asset held by ING Groep, according to data compiled by Bloomberg. AIA was also among shortlisted bidders for Australia & New Zealand Banking Group's wealth unit, people familiar with the matter said in July.
The purchase will "significantly expand AIA's access to potential new customers and enable us to engage them in a new way," AIA chief executive officer Ng Keng Hooi said in a statement, pointing to the bank's extensive branch network.
AIA said it expects the transaction to generate ongoing pre-tax cost savings of at least US$60 million per year within three years of completion.
For Commonwealth Bank, the sale is expected to boost its Common Equity Tier 1 capital by A$3 billion, or by 70 basis points, according to the statement. It is expected to result in an accounting loss of about A$300 million after tax. The deal is expected to be completed by the end of 2018.
The Australian bank did not give further details about its wealth management review but said its wealth management chief executive, Annabel Spring, would leave the company in December.
Commonwealth Bank, meanwhile, is facing several lawsuits and regulatory investigations over allegations of widespread breaches of anti-money and counter terrorism financing laws leveled against the company in August.