Suncorp offloads Australian life unit as cash earnings dip

Suncorp Group has entered an agreement to sell its Australian life insurance division to TAL Dai-ichi Life Australia Pty Ltd for $725 million, after announcing a 1.5 per cent fall in net profit to $1,059 million for fiscal 2018.

Cash profit for the year, which strips out one-off and volatile items, was down 4.1 per cent to $1,098 million for the year.

Suncorp said its strong capital position enabled it to pay a fully franked ordinary dividend of 40 cents a share, which brought full-year ordinary dividends to 73 cents a share.

The firm also said it will pay a fully franked special dividend of 8 cents a share, bringing full-year dividends in total to 81 cents a share, up 11 per cent on the prior year.

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Completion of the sale of the life insurance business is expected by the end of December, Suncorp said, subject to the completion of certain conditions and regulatory approvals in Australia and Japan.

The firm also said it expects to return about $600 million to shareholders following the transaction, with the structure and exact quantum of the capital return to be announced prior to completion.

The sale also includes a 20-year strategic alliance with TAL to offer life insurance products through Suncorp’s Australian distribution channels.

Suncorp expects the transaction – which followed a strategic review by the firm of its Australian life insurance business and the assessment of a number of options – to result in an after-tax non-cash write-down of about $880 million in fiscal 2019.

Suncorp chief executive Michael Cameron said the sale of the life unit was the “superior option,” given it will simplify Suncorp’s business model, provide a significant release of capital to shareholders and be accretive to cash return on equity.

“The long-term strategic alliance between TAL and Suncorp will allow us to offer excellent value to Suncorp’s Australian customers. The strategic alliance will leverage the strengths of our respective organisations to deliver a superior customer experience,” he said.

TAL Group chief executive, Brett Clark, said the transaction will significantly expand TAL’s presence in Australia and provide “exciting opportunities” with additional trusted and recognised brands, and a broader group of financial advisers.

“This acquisition will enhance TAL’s scale and capability across the retail, group and direct segments, and will open up important new distribution channels,” he said.

“It will provide us with a strong base for continued growth and reflects our ongoing commitment to offering Australians a range of life insurance options to meet their diverse needs.”