TAL Dai-ichi Life Australia, a leading Australian life insurance specialist, yesterday announced that it has entered into a Heads of Agreement to acquire Suncorp's Australian life insurance business for a cash consideration of approximately A$640m ($473m) plus adjusted net worth on completion.
Binding legal agreements are expected to be finalised by the end of this month, and the transaction completed by the end of this year, subject to the satisfaction of conditions and approvals in Australia and Japan.
Suncorp told the Australian Securities Exchange that the consideration was expected to be around A$725m with the transaction resulting in a non-cash write-down to goodwill and net assets of around A$880 million.
The acquisition will enable TAL to extend its life insurance expertise to providing high quality life insurance solutions for Suncorp customers, distribution partners and financial advisers, TAL said in a statement.
The deal brings together two major life insurance businesses and a long term relationship with the Suncorp Group including a portfolio of well-established Australian brands, including AAMI, APIA and GIO.
The transaction will also create a platform for expansion of TAL’s distribution footprint, with a 20-year strategic alliance agreement for the sale of life insurance products through Suncorp’s distribution network, including its digital channels, contact centres and store network.
TAL Group CEO and managing director, Brett Clark, said, “The Suncorp Group is one of Australia’s largest and most important financial services businesses. We are delighted to be partnering with Suncorp and extending our specialist experience to Suncorp’s existing life insurance customers.
“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.
“This acquisition will enhance TAL’s scale and capability across the retail, group and direct segments, and will open up important new distribution channels. 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.”
Moody's Japan's assessment
Commenting on the deal, Mr Soichiro Makimoto, Vice President Senior Analyst, Financial Institutions Group, Moody’s Japan, said, “The agreement is credit positive for The Dai-ichi Life Insurance Company, Limited, a subsidiary of Dai-ichi Life Holdings (Dai-ichi Life HD), because Dai-ichi Life HD can diversify its earnings sources geographically and achieve growth, amid a shrinking domestic population and continuous ultralow domestic interest rates.
“TAL Dai-ichi Life Australia Pty Ltd will form a strategic alliance with Suncorp Group for 20 years and use Suncorp’s Australian distribution channels, which will support Dai-ichi Life HD in its expansion of its Australian business.”
He added that the negative financial impact of the deal is limited, since the purchase price is less than 2% of the consolidated net assets of Dai-ichi Life HD.
The Japanese insurer spent A$1.2 billion in 2011 to buy TAL.