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 that 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, and will leave AIA as the life insurance market leader on both side of the Tasman.

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 reach a combined base of 13 million customers in Australia and New Zealand through ASB and CBA.

And he said the company would be going for growth in New Zealand, not looking to cut costs.

The life insurance industry has had a weak growth record in recent years in New Zealand, with growth coming largely from rising premiums driven by the ageing of the population.

"This does demonstrate confidence in this part of the world." AIA Australia chairwoman Theresa Gattung

But Mu said AIA’s ‘‘Vitality’’ programme would be the basis for increasing New Zealanders’ engagement with life insurance.

Vitality is a programme of rewards and partnerships designed to help policyholders stay healthy and live longer.

In Australia, the programme had prompted 45,000 health checks and 160,000 recorded new gym visits, he said, and instead of policyholders having one contact with AIA each year at renewal time, they had about 20 throughout the year.

AIA Australia chairwoman Theresa Gattung said: ‘‘We have a great team, and we look forward to expanding on this with the Sovereign and CommInsure teams in due course, and building our partnership with CBA and ASB.’’

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

Sovereign had about 700 employees, and Gattung assured them no cost-cutting was planned.

‘‘This is not about head count reduction,’’ she said.

She said the deal demonstrated AIA’s confidence in New Zealand.

‘‘This does demonstrate confidence in this part of the world. It is the largest M&A [merger and acquisition] deal AIA has done’’ since it listed on the Hong Kong stock exchange in 2010, she said.

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