The Press

AIA buys Sovereign in $4b deal

- ROB STOCK CHRIS HUTCHING

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.

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. The choice of an Ashburton farm for a Chinese space programme has been highlighte­d in a research paper by Anne-Marie Brady, a Canterbury University specialist in Chinese affairs.

Brady said New Zealand was useful to China’s near-space exploratio­n research ‘‘as it expands its long range precision missiles, as well as having civilian applicatio­ns’’.

Chinese company KuangChi Science used one of Shanghai Pengxin’s farms near Ashburton for the launch of China’s first nearspace commercial programme in June 2015.

The launch of the near-space balloon was described in a Stuff article at the time as a test to deliver broadband.

It followed the November 2014 signing of a memorandum between Chinese President Xi Jinping, former New Zealand prime minister Sir John Key, KuangChi Science, and Airways New Zealand.

According to KuangChi Science’s website, the balloon completed commercial testing of an automatic identifica­tion system, space exploratio­n, and space-to-earth high-speed communicat­ions.

Maria Pozza, a space law solicitor at Lane Neave, said new legislatio­n meant that all highaltitu­de launches had to be certified by the NZ Space Agency at the Ministry of Business, Innovation and Employment.

Meanwhile, Brady’s research paper outlined China’s policy of ‘‘soft influence’’ and political and business relationsh­ips including Key’s Parnell house sale this month to a Chinese buyer.

‘‘The property was sold for $20 million, well above market rates for the area, to an undisclose­d Chinese buyer,’’ Brady said.

Brady said Chinese-language media in New Zealand had become increasing­ly Chinese statecontr­olled, and raised suspicions about journalist scholarshi­ps and visits to China.

New Zealand was of interest to China because of its relationsh­ips with the Cook Islands, Niue, and Tokelau, its interest in Antarctica, minerals, and dairy investment­s, given New Zealand supplied 24 per cent of China’s milk, Brady said.

The classic approach was to appoint foreigners with access to political power to high-profile roles in Chinese companies in the host country, use sister-city relations, and partnershi­ps with universiti­es, and research centres to access military technology and commercial secrets, Brady said.

‘‘New Zealand needs to face up to some of the political difference­s and challenges in the New Zealand-China relationsh­ip and to investigat­e the extent and impact of Chinese political influence activities on our democracy.

‘‘New Zealand would be wise to follow Australia’s example and take seriously the issue of China’s big push to increase its political influence activities, whether it be through a special commission or a closed-door investigat­ion.’’

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

 ?? PHOTO: LAWRENCE SMITH/STUFF ?? PM Bill English faced questions this month about MP Jian Yang’s background in the Chinese intelligen­ce services.
PHOTO: LAWRENCE SMITH/STUFF PM Bill English faced questions this month about MP Jian Yang’s background in the Chinese intelligen­ce services.

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