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NAB finishes wealth shake-up with sale of life insurance
By Georgia Wilkins
National Australia Bank has completed the sale of 80 per cent of its life insurance business, promising the deal will make it better able to cope with tightening regulation.
The bank announced the moves in July as part of a plan to shake up its wealth division and lift performance.
New direction: Andrew Thorburn said the sale was the end of the bank's major divestments.Credit: Brendon Thorne
In a statement on Monday, the bank said it had finalised the sale of the business to Nippon Life Insurance Company for $2.4 billion.
The bank will retain ownership of 20 per cent of the business and start a partnership with Nippon Life that includes a 20-year distribution agreement to provide life insurance products through the NAB banking network.
NAB chief executive Andrew Thorburn said it represented the end of the bank's major divestments.
"From today we move forward with a simpler, clearer wealth model designed to serve our customers better – with continued ability to offer leading life insurance products and services," he said.
The changes to the wealth division have also seen NAB merge five super funds into one to create Australia's largest retail super fund, the MLC Super Fund.
The super funds were built inside the life insurance company, so the bank needed to extract them, and in the process, merged them.
The bank has invested $300 million into the super fund, which overtakes a fund managed by Commonwealth Bank-owned Colonial to become the largest for-profit fund in the country.
NAB's wealth division has been under scrutiny from a strategic review launched several years ago in response to sub-par returns in the business.
Andrew Hagger, head of the bank's wealth division, said the merger allowed the bank to respond to changes to government regulation more efficiently.
"Over time whenever the government makes changes to super, it's a much more simplified environment to comply with these changes, so that means reduced costs," he said.
Mr Thorburn said it would also make it easier for customers to switch and change various products and features.
NAB reports its full-year results on October 27. It said the financial costs of the transaction were in line with what it forecast in 2015, namely a loss on sale worth $1.2 billion-$1.3 billion and reduction of goodwill worth $1.6 billion-$1.7 billion.
The bank's third-quarter profit fell 3 per cent to $1.6 billion as funding costs and charges for soured loans increased.