The Commonwealth Bank of Australia (CBA) is considering options for the group's life insurance business, including a sale of the unit which is valued at as much as A$5 billion (US$4 billion).
Sydney-headquartered CBA has JPMorgan's bankers assisting with the review, which will explore the various potential deal structures as demonstrated by its rivals in recent years, including a full sale, partial sale or quota share deal, reported the Australian Financial Review.
CBA's life business has failed to garner the strong market share the bank expects from other major business units such as home loans, credit cards, household deposits and business banking. The unit had a 11% share of the life insurance market as at 30 June last year, making A$255 million profits from A$2.08 billion in net premium income.
Other Australian banks which disposed of their insurance units in the last two years included National Australia Bank which sold an 80% stake in MLC Life to Nippon Life Insurance and Macquarie which sold its life insurance business to Zurich Australia. ANZ is currently considering bidders for its wealth unit which includes insurance.
CLSA analyst Brian Johnson said life insurance is a capital intensive business in which banks such as CBA have no clear competitive advantage. Their advantage is the ability to distribute such products to retail customers. "They are natural distributors, but not natural owners," Mr Johnson said.