Suncorp hands out cash, sells life insurance division for $725m

Suncorp has pledged to return about $600m to shareholders after agreeing to offload its life insurance business.

Suncorp CEO Michael Cameron. Pic: Annette Dew

Suncorp Group has pledged to return about $600 million to its shareholders after agreeing to the sale of its Australian life insurance business.

The banking and insurance provider (SUN) also said it would pay a special dividend for the second half of its financial year, supported by a strong balance sheet and in anticipation of a lift in performance during the coming year.

The Brisbane-based company said it had signed a nonbinding agreement to sell its life insurance operations for about $725 million to TAL Dai-ichi Life Australia, an arm of Japanese insurer Dai-ichi Life Group.

It comes after The Australian’s DataRoom flagged that Dai-ichi was tipped as the front runner to buy the business on June 11.

In recent years, several of Australia’s big financial-services companies have moved to exit capital-intensive life-insurance operations, selling them to focused insurers with greater scale. Among other deals, Commonwealth Bank of Australia agreed in September to sell its life businesses in Australia and New Zealand to AIA Group for $3.8 billion, and ANZ in December moved to offload its life business to Zurich Insurance Group for $2.85 billion.

Suncorp’s deal, which remains subject to certain conditions and regulatory approval in Australia and Japan, is expected to close by the end of December. When concluded, the company plans to detail the structure for returning capital to shareholders.

The sale is forecast to offer a marginal lift to cash return on equity in the new financial year, though Suncorp said it expected to book a writedown on goodwill and assets of about $880 million.

The agreement will include a 20-year distribution alliance that would see Dai-ichi’s TAL Life unit offer life insurance products through Suncorp. The deal doesn’t cover Suncorp’s New Zealand life insurance operation.

The sale was announced alongside Suncorp’s full-year result, which included a 1.5 per cent drop in net profit to $1.06 billion for the year to June 30 from $1.08 billion the year before as the company was squeezed by a rise in claims and operating expenses.

Still, the company confirmed the stronger second half to the year it had flagged in February, after a hailstorm in southern Australia helped drive up the cost of natural disaster claims above the allowance set for the first six months. Net profit for the second half was up 34% on the first six months, it said.

Profit from Suncorp’s general insurance business was down 1.2 per cent for the year at $681 million, through the gross written premium was little changed at $8.14 billion, and its Australian insurance profit was up 2.2 per cent to $739 million. The life insurance operations broadly recorded a 71 per cent rise in profit to $58 million, while Suncorp’s banking business saw profit fall 2.8 per cent to $389 million.

The company, which until the late 1990s was owned by the Queensland government, said it would pay a special dividend of 8 cents a share on top of an unchanged annual payout of 73 cents.

Dow Jones Newswires