Suncorp counts cost of sell-off of life insurance unit

Suncorp has disclosed the amount of ongoing costs stemming from the $725 million sale of its life insurance unity.

Suncorp has disclosed the amount of ongoing costs stemming from the $725 million sale of its life insurance unit, which the banking and insurance group is targeting to complete at the end of February.

Suncorp said when the divestment to TAL Dai-ichi Life Australia completes there would be about $30m in pre-tax of annualised “stranded costs” retained by the business. The estimate factors in a number of transition agreements with the buyer.

Stranded costs are those the company does not have a reasonable opportunity to recover.

The company expects the impact of stranded costs on the 2019 result will be about $10m pre-tax.

Sources suggested the prudential regulator would rule on the change of ownership early in the new year. That comes after Suncorp and TAL last month delayed the completion date for the deal to February 28 from December 31.

The transaction will also see Suncorp continue to earn income from the division via a 20-year distribution agreement with TAL.

The company planned to recognise that revenue as “other income” within domestic insurance operations. It also outlined that in the interim earnings report, to be handed down in February, the life insurance business would be recognised as an asset held for sale.

Suncorp has disclosed an after tax non-cash loss on the divestment of about $880m, which includes a $145m writedown of goodwill. That will be reflected in the interim 2019 earnings result.

Suncorp will seek shareholder approval to return about $600m to investors following the sale.