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BoCommLife deal is credit positive for Mitsui Sumitomo, CBA: Moody's

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BoCommLife deal is credit positive for Mitsui Sumitomo, CBA: Moody's

Mitsui Sumitomo Insurance Co. Ltd.'s proposed acquisition of Commonwealth Bank of Australia's 37.5% stake in China's BoCommLife Insurance Co. Ltd. is credit positive for the Japanese insurer and the Australian bank, Moody's said.

The deal will diversify Mitsui Sumitomo Insurance's portfolio by adding more overseas assets and life businesses, as well as enable it to access the Chinese market. CBA also will benefit from the sale because it will raise its common equity Tier 1 ratio by 13 basis points at a time when capital requirements for Australian banks are increasing, Moody's said.

Under the deal, Mitsui Sumitomo Insurance will acquire the stake in BoCommLife from CBA unit Colonial Mutual Life Assurance Society Ltd. for about ¥75 billion. The purchase price will have a limited financial effect because it equals only around 4.6% of the Japanese insurer's consolidated net asset at the end of March 31, 2017, the rating agency noted.

Mitsui Sumitomo Insurance is a unit of MS&AD Insurance Group Holdings Inc. BoCommLife is a subsidiary of Bank of Communications Co. Ltd.

As of May 25, US$1 was equivalent to ¥109.37.