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Mitsui Sumitomo Insurance to buy 37.5% stake in China-based BoCommLife Insurance

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Mitsui Sumitomo Insurance to buy 37.5% stake in China-based BoCommLife Insurance

Mitsui Sumitomo Insurance Co. Ltd. has agreed to acquire Commonwealth Bank of Australia's 37.5% stake in Bank of Communications Co. Ltd. unit BoCommLife Insurance Co. Ltd., Tokyo's The Nikkei reported.

The Japanese company will acquire the stake through a subsidiary for ¥70 billion, subject to the approval of Chinese financial authorities. Bank of Communications owns the remaining 62.5% interest in BoCommLife Insurance, according to the report.

The transaction signals Mitsui Sumitomo Insurance's return to a major growth market amid deregulation in China. The country is easing rules related to foreign investments in the financial sector, a move that is expected to improve business environment for Mitsui Sumitomo Insurance and other foreign players, the news outlet reported.

Meanwhile, CBA expects the sale to result in an indicative after tax gain of approximately A$450 million. The carrying value of the Australian bank's equity interest in BoCommLife Insurance was A$150 million as of Dec. 31, 2017.

Prior to the completion of the deal, BoCommLife Insurance will undertake a capital increase under which CBA's pro rata contribution will be 1.125 billion yuan. The amount will be separately reimbursed by Mitsui Sumitomo Insurance upon the completion of the deal.

The transaction is a requirement for CBA's sale of its Australian and New Zealand life insurance business to Hong Kong's AIA Group Ltd., which is subject to regulator approvals.

Mitsui Sumitomo Insurance is a unit of MS&AD Insurance Group Holdings Inc.

As of May 22, US$1 was equivalent to ¥111.05 and to 6.37 Chinese yuan.