Commonwealth Bank of Australia revised agreements with AIA Group Ltd. in its planned sale of Colonial Mutual Life Assurance Society Ltd. to the Hong Kong-based insurer, which will see CBA receive A$150 million less in aggregated proceeds against the original sale price.
The revision comprises a joint cooperation agreement, reinsurance arrangements, partnership milestone payments and a statutory asset transfer, according to an Aug. 23 release. It remains subject to Australian regulatory and life insurance entity board approvals, as well as entry into reinsurance arrangements.
The moves are expected to be implemented in stages throughout fiscal 2020, with CBA set to receive around A$2.38 billion in aggregated proceeds. It is expected to receive A$750 million of proceeds and distributions by the end of the first half and the remaining A$1.63 billion by year-end.
Upon completion, the deal is expected to have released A$1.6 billion to A$1.8 billion of CBA's common equity Tier 1 capital, leading to a pro forma increase to the CET1 ratio of about 35 to 40 basis points as of June 30.
CBA had agreed to sell its life insurance business, also known as CommInsure Life, to AIA Group in 2017 for a total of A$3.8 billion. The deal had been expected to close in 2018 but for ongoing regulatory approval processes.
Among other things, the revised deal will see CBA and AIA sign a joint cooperation agreement to transfer to AIA the full economic interests tied to CommInsure Life, excluding the lender's 37.5% equity interest in BoCommLife Insurance Co. Ltd. that it holds through CommInsure Life. AIA Australia and New Zealand CEO Damien Mu will then lead CommInsure Life.
AIA will also have an option to extend the Australian and New Zealand distribution deals to 25 years from 20 years.
CBA added that it is committed to the sale of the group's 37.5% equity interest in BoCommLfe to MS&AD Insurance Group Holdings Inc. The deal remains subject to regulatory approval from the China Banking and Insurance Regulatory Commission.
