A Brisbane-based insurance giant is looking to reduce its exposure to the troubled life insurance market as it announced a review of “strategic alternatives” for its life insurance arm.
Suncorp, Australia’s second largest general insurer by market share, has announced that it is considering the sale of its $1.5 billion life insurance unit as it reported a 5% increase in half-yearly net profits, below market expectations of about 8% growth, Reuters reported.
The life insurance industry has suffered from increased customer claims and policy cancellations since the media exposed the use of discredited methods to reject legitimate claims for insurance payouts in March last year.
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This prompted the National Australia Bank to sell the majority of its operations to Japan’s Nippon Life for $2.4 billion; the Macquarie Group to offload its life business to Zurich; and ANZ to consider selling its $4.5 billion life insurance and wealth division.
AMP, meanwhile, is looking to secure a second reinsurance deal to cover its life insurance book, the report said.
Aside from the sale of all or part of the life insurance unit, which has an embedded value of $2 billion, other options for the business included reinsurance deals and partnership arrangements.
Suncorp chief executive Michael Cameron said: “It is too early to give detailed guidance on what might be the benefits of the alternatives.”
He said that under any scenario, Suncorp would continue to distribute life products as part of its strategy of being a one-stop financial shop for customers, Reuters reported.
“The review is a good thing and it is timely,” CLSA analyst Jan van der Schalk told Reuters. “Over time why wouldn’t (Suncorp) be looking to be merely the owner of that platform and outsourcing the manufacturing to someone else?”
Suncorp reported a $584 million cash profit for the six months ending December 31, up from the previous year’s $556 million, after insurance premium growth of 4.3%, Reuters said. Its life insurance division, meanwhile, posted a 52% drop in profits to $11 million in the first half.
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