Suncorp bonanza follows sale of life insurance arm

Suncorp has kicked off a $600 million capital return to investors with a special dividend.

Brisbane Square Suncorp store. Photographer: Liam Kidston.

Suncorp has kicked off a $600 million capital return to investors with a special dividend stemming from the sale of its life insurance arm, which will be followed by a pro-rata return of capital.

In an ASX statement, the insurance and banking group said after completing the divestment of its life insurance division to Japan’s TAL Dai-chi Life for $725 million, it would deliver an 8c per share fully franked special dividend.

Payment of the special ­dividend amounts to about $100m of the net proceeds from the life insurance sale and will occur on May 3.

Suncorp joins three of the big four banks, AMP and Macquarie Group in leaving the life insurance industry as local players struggled with limited return on equity and the capital intensity of offering those products.

Suncorp’s market announcement said following the special dividend, the “preferred means” of handing back funds to investors was a pro-rata return of share capital. That process would include a share consolidation — or reduction of shares on issue — relative to the amount of stock an investor held.

The capital return remains subject to shareholder approval and Suncorp said it planned to provide more information in coming months.

Suncorp’s stock climbed 1.9 per cent after the news to close at $13.44 on Friday. That took year-to-date gains to 6.4 per cent.

Global life insurance players have homed in on Australia as local players have retreated. In the past four years, offshore groups significantly stepped into the local market, largely via acquisitions. Those include Pan-Asian group AIA, Japan’s Nippon and Swiss giant Zurich.

CBA has agreed to sell its life arm to AIA, while ANZ expects the sale of its life division to Zurich will complete in late May.

Macquarie sold its unit to Zurich too while National Australia Bank sold a majority stake in its life insurance arm to Nippon.