The Commonwealth Bank will sell its life insurance business for $150 million less than originally agreed as the sale experiences delays and regulatory roadblocks.
The banking group today announced its divestment of CommInsure Life to AIA Group is facing an "extended period of uncertainty" as a result of pending foreign regulatory approvals.
It unveiled a revised agreement that values CommInsure Life at $2.375 billion, which involves entering a joint co-operation agreement with AIA, reinsurance arrangements, partnership milestone payments and a statutory asset transfer.
CBA flagged its intention to sell 100% of CommInsure Life back in September 2017, and expected the transaction to complete by the end of the 2018 calendar year.
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CBA said the joint co-operation is expected to result in full economic interests to AIA, which excludes the group's 37.5% equity interest in BoCommLife Insurance Company.
AIA will obtain direct management and oversight of the business under the leadership of AIA Australia and New Zealand chief executive Damien Mu.
The joint co-operation agreement is expected to be implemented before the end of 1H20, at which time CBA will receive an upfront payment of $500 million.
Additionally, CBA flagged it is progressing a "potential statutory asset transfer as an alternative approach to completing the divestment" of CommInsure Life to AIA.
If implemented, the statutory asset transfer would be expected to take about nine months to implement and upon completion - whether achieved through a share sale or statutory asset transfer - CBA will receive a final payment of $1.475 billion from AIA.
Also as part of the revised agreement, CommInsure Life's main life insurance entity Colonial Mutual Life Assurance Society (CMLA) plans to enter into a reinsurance arrangement with a global reinsurer. CBA expects to receive a distribution from CMLA of about $200 million in return.
CBA said it remains committed to completing the sale of its 37.5% equity interest in BoCommLife to MS&AD Insurance Group Holdings.
Completion of the sale of the BoCommLife equity interest remains subject to regulatory approval from the China Banking and Insurance Regulatory Commission (CBIRC), and CBA is working constructively with CBIRC in relation to the process, the bank said.
In a separate update, the bank appointed a group executive of group general counsel and governance in Carmel Mulhern, and a group executive of program delivery in Scott Wharton.
Mulhern will commence in the role in January 2020, joining from Telstra where she is currently group general counsel and group executive of legal and corporate affairs.
Wharton joined CBA in 2016 and has led change programs to upgrade the bank's technology and regulatory operations.
Over the past year, he has been reporting directly to chief executive Matt Comyn, ensuring the bank is implementing the recommendations from the APRA's prudential inquiry report into governance, culture and accountability within CBA.