Mitsui Sumitomo has struck a deal with the Commonwealth Bank of Australia (CBA) to acquire its 37.5 percent stake in Chinese life insurer BoCommLife.
The Japanese carrier said it will pay RMB4.3bn (c.$680mn) for the shareholding once BoCommLife has completed its scheduled RMB3bn capital increase to existing shareholders, with the deal financed by cash on hand.
The transaction marks Mitsui’s entrance into the Chinese life market, which it cited as the third largest life insurance market in the world after the US and Japan, with the firm anticipating further growth in the future.
The carrier said the move aims to enhance its growth potential and profitability as well as to achieve further risk diversification of its group-wide business portfolio.
Furthermore, securing BoCommLife as a joint venture partner will enable Mitsui to develop a secure business base in the country’s life insurance sector.
Meanwhile, CBA said the said the sale of its stake in the Chinese life insurer will result in an after-tax gain of around A$450mn ($340.7mn).
CBA CEO Matt Comyn said: “This transaction represents a further step in simplifying and focusing our portfolio and follows the announcement of the proposed sale of the Group’s life insurance businesses in Australia and New Zealand to AIA Group, and the strategic review of the Group’s life insurance business in Indonesia.”
The sale of BoComm Life satisfies a condition of CBA’s $3bn sale of its Australian and New Zealand life insurance businesses to AIA Group, which was announced in September.
BoCommLife was established in 2000 and largely sells insurance solutions through banks, leveraging the bancassurance channel with its parent to grow its market share.
Closing of the transaction remains subject to approval from the China Banking and Insurance Regulatory Commission, Chinese merger clearance and completion of the BoComm Life capital increase.