Suncorp to divest insurance unit to TAL

Suncorp has signed a share-sale deed with TAL Dai-Ichi Life Australia to divest its Australian life insurance business.

Suncorp has confirmed it will ­return about $600 million to shareholders after signing a share-sale deed with TAL Dai-Ichi Life Australia to divest its Australian life insurance business.

The bancassurer will sell the business to TAL under the deed for about $725m, which includes the purchase price and adjusted net worth.

The transaction also includes a 20-year distribution agreement, with TAL to offer life insurance products through the Suncorp distribution network, including its digital channels, contact centres and store network.

Completion of the deal is expected by the end of the year.

In its annual result last month, Suncorp said it had signed a non-binding heads of agreement with TAL.

The company said the deal would include a non-cash writedown to goodwill and net assets of about $880m, to be booked in the 2019 financial year. The structure of the capital return will be announced prior to completion of the transaction, which is expected to marginally increase cash return on equity.

Suncorp announced a 1.5 per cent decline in annual net profit to $1.06 billion. The result included $146m of accelerated investment in its marketplace strategy, and the company also had to absorb a fourfold increase in regulatory costs to $54m.

The business improvement program delivered net benefits of $40m, exceeding the company’s target by $30m.

The key target for the group this year is a cash return on equity of 10 per cent, up from 8 per cent last year and 9.2 per cent in the second half.

Suncorp has forecast revenue growth in a range of 3-5 per cent and a flat expense base of $2.7bn.

Investors responded well to the result, particularly the 34 per cent increase in second-half profit compared to the first half.

Chief executive Michael Cameron said this placed Suncorp in a good position to achieve its 2019 targets.