Japanese financial powerhouse Dai-ichi has won the competition to buy Suncorp’s life insurance business, outlaying $725 million for the division.
Suncorp (SUN) said, while delivering its annual net profit today of $1.059 billion (down 1.5 per cent on last year), that it had entered into a non-binding heads of agreement with Dai-ichi’s Australian subsidiary, Dai-ichi Life Australia.
It comes after a prolonged sales process for the business run by Luminis Partners and Nomura. Dai-ichi was advised by Greenhill.
It comes after The Australian’s DataRoom flagged that Dai-ichi was tipped as the front runner to buy the business on June 11.
Earlier expectations were that the business may sell for as much as $2bn, although that was thought to be with other parts of the business included, such as the New Zealand operations, which Suncorp has retained.
Dai-ichi had been up against other Japanese life insurance rivals, including MS&AD and Meiji Yasuda.
US-based AIG was also known to have been in the process.
Dai-ichi Life is the third largest life insurer in Japan behind Japan Post and Nippon Life, and is looking for growth globally because of a sluggish economy at home and a declining population.
The life insurance industry has been reeling from increased customer claims and policy lapses.
It is also facing challenges involving lofty upfront commissions to third parties and higher regulatory capital requirements.
For Dai-ichi, the opportunity to continue to distribute the life insurance products through Suncorp’s banking networks is attractive.
The deal gives Dai-ichi access to Suncorp’s 9 million customers.
Japanese parties weighed buying ANZ’s life insurance business and wealth management operation last year when they came up for sale, but they didn’t progress in the competition.
Suncorp chief executive Michael Cameron flagged the group would explore a sale of life insurance in February last year.
He said while Suncorp would always distribute life products, the operations were “dilutive” to its ambition to improve the group’s return on equity to 10 per cent.
The widely held view is that life insurance operations are better off in the hands of global specialists.
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