According to local newspaper The Australian Financial Review, JP Morgan is assisting with a review of CBA’s life insurance unit, which has been valued at around A$5bn (£3bn, $4bn, €3.4bn) and had a market share of 11% as of June 2016.
They will explore various potential deal structures, which include a full- or partial sale or a quota share deal.
Financial services firm The Motley Fool Australia reported that life insurance businesses have struggled across Australia and globally over recent years due to the increasingly competitive market, rising policy terminations and higher-than-expected claims.
Capital adequacy selling incentive
The Australian Prudential Regulation Authority (APRA) released new guidelines on Wednesday, saying that raising the capital adequacy requirements would ensure that banks were “unquestionably strong”.
According to The Australian Financial Review, changes to capital adequacy rule have reportedly made life insurance a marginally more capital-intensive business over the past few years.
In response, CBA rivals National Australia Bank (NAB) and Macquarie Group have already sold their life insurance businesses.
NAB sold an 80% stake in its life insurance arm to Japan’s Nippon Life insurance in October 2016, while Macquarie Group sold its life insurance unit to Zurich in March 2016.
The newspaper added, however, that the potential sale of CBA’s life insurance unit is not linked to the new requirements.
