AIA buys Sovereign in $4b deal

Sovereign, the country’s largest life insurer, has been sold.

The buyer is Asia-wide insurer AIA, which already has a business in New Zealand.

The sale is part of a transTasman deal, which will see AIA also acquire CommInsure in Australia from Sovereign’s ultimate parent company, Commonwealth Bank of Australia (CBA).

AIA is to pay A$3.8 billion (NZ$4.15 billion) for the two businesses, and has signed a 20-year deal under which ASB and CBA will continue to sell insurance from the two businesses.

The acquisition is expected to be completed in 2018.

Sovereign protects more than 646,000 New Zealanders and their families, and in its last financial year paid out $350 million in claims.

Nick Stanhope, Sovereign chief executive, assured policyholders the deal would not effect their insurance cover.

‘‘The relationship with customers is governed by our policy documents, and a change of ownership does not impact this,’’ he said.

AIA’s Australia and New Zealand chief executive, Damien Mu, said the deal would add to AIA’s strength in retail and group insurance, and would reach a combined base of 13 million customers in Australia and New Zealand through ASB and CBA.

‘‘The scale and nature of the agreements with CBA and ASB … will significantly transform and expand our market leading presence in Australia and New Zealand,’’ Mu said.

AIA currently employs about 140 people in New Zealand, where it has operated since 1981 from offices in Auckland, Wellington and Christchurch.

It has mainly sold its life, health and income protection insurance through advisers in New Zealand.