Fresh from selling its banking division, Suncorp likely to focus on Zurich’s insurance operation

Suncorp is tipped to chase Zurich’s Australian insurance operations. Picture: Richard Gosling

Australian insurer Suncorp is expected to revive efforts to buy Zurich Australia’s general insurance operation, after reaching a deal to sell its banking division to ANZ for $4.9bn.

ANZ agreed to buy it in July after Suncorp had been working on a plan to sell or demerge the bank since last year.

The deal still needs approval from the Australian Competition and Consumer Commission, and the jury is still out as to whether the ACCC believes that the transaction would create too much concentration in the banking market for customers.

Suncorp was one of the insurance firms competing for the Zurich business when it was up for sale last year, but Zurich withdrew the offering for sale and talks between the two parties about a transaction are understood to have been on and off over the years.

Also lining up was Suncorp’s Australian-listed insurance rival, QBE, while Chubb, advised by Macquarie Capital, was also understood to be a bidder.

Suncorp counts Barrenjoey as an adviser, and cashed up from its bank sale from ANZ, it is positioned to bid strongly for the business, which experts believe will make a lot of strategic sense.

Most believe that it is inevitable Swiss insurer Zurich will put the business back up for sale, but the unknown is whether it opts to include its travel insurance unit in any offering and whether Suncorp would be a keen buyer of that part.

Zurich’s Australian travel insurance unit consists of the Cover-More Group it acquired in 2017 for $741m.

Last time around, the Cover-More component was not included, nor its life insurance unit, consisting of the ANZ OnePath Life business that Zurich purchased in 2019 for $2.85bn and was thought to be worth about $500m.

DataRoom reported in January that Suncorp had initially been distracted by a review of its bank when it came to the Zurich business, but sources later said it was busy working on a transaction.

At that time, most were pointing to Suncorp as the obvious buyer.

Suncorp, with Barrenjoey on board, was said to be a keen buyer of CBA general insurance last year when it was up for sale. It used investment bank UBS to chase the asset.

But a transaction was understood to have been challenging when it came to gaining permission from the ACCC.

DataRoom revealed Zurich’s sale plans for its Australian general insurance unit a year ago; Goldman Sachs and PwC were advising on the sale.

Industry experts believe that the Swiss financial may be looking to stage an exit from the Australian general insurance market because it is sub scale and has a chequered history here.

Zurich’s sale follows others in the insurance space in recent years.

Westpac sold its general insurance division to Allianz for $700m last year and CBA this year divested its general insurance unit for $1bn to Hollard Australia in a move that sees banks focus more on their core lending operations.

Zurich is prominent in general insurance in Australia. It has 3 per cent of the market share, but Allianz Australia is the largest foreign-owned insurer.

Other major players here are IAG, Suncorp and QBE.

Zurich offers investment and superannuation products alongside general and life insurance to its Australian customers.