Financial services provider, Suncorp Group Limited (ASX: SUN) has provided an update on the sale of its Australian life insurance business. After giving the update, the share price of Suncorp uplifted by 0.077 percent as on 13 December 2018. As at 2:40 PM AEST, the price edged slightly to a lower level.
The sale of the Australian life insurance business was announced on 4 September 2018 after the company signed a share sale deed with TAL Dai-ichi Life Australia Pty Ltd (TAL).
TAL is one of Australia's leading life insurance specialist who is having an experience of more than 140 years. Currently, TAL is dealing will more than 4 million Australians, and it is offering life insurance through different channels. TAL is part of the Dai-ichi Life Group which is one of the most prominent insurance groups in the world. TAL Dai-ichi Life Australia Pty Ltd (TAL) will buy Suncorp’s Australian life insurance business for a total consideration of $725mn.
In the update, the company reported that the Australian Life Insurance results for the first half of FY 2019, combined with the Participating Wealth business previously reported through the Banking & Wealth function, will be disclosed as a separate line item in the Investor Pack tables. The results will also incorporate the performance of Suncorp Life and Superannuation Limited (SLSL), the entity being sold, as well as other discontinuing distribution activities. In the statutory accounts of the first half of FY 2019 statutory accounts, only the earnings of SLSL will be disclosed as ‘profit/(loss) after tax from discontinued operations.’
It is expected that this sale will result in an after-tax non-cash loss on sale of around $880mn, which will be reflected in the FY 2019 results. The after-tax loss includes a $145 million write-down of goodwill which is going to be reflected in the first half result of FY 2019.
On 31 December 2018, assets will be transitioned to TAL and they will be reflected as ‘held for sale’ in the balance sheet. As per the Proforma Life Insurance and Wealth statement of assets and liabilities, as at 30 June 2018, the company was having $5,694 million total assets and $3,583 million total liabilities.
After the sale of the Australian life business, it is expected that Suncorp will be having approximately $30 million pre-tax of annualized stranded costs which will be removed from the business by the end of FY 2020. However, the impact of stranded costs on the FY19 result is forecast to be around $10mn pre-tax. Suncorp is planning to seek shareholder approval to return approximately $600 million, as a pro-rata return of capital and share consolidation.
As per Proforma contribution to profit by function, as at 30 June 2018, the Insurance (Australia) profit after tax was $447 million, the Banking & Wealth profit after tax was $184 million and General Insurance profit after tax was $53 million. The company reported the net profit after tax of $607 million. The Australian Life Business held for sale profit after tax was $36 million.
In the last six months, the share price of the company decreased by 6.17 percent as on 12 December 2018 and traded at a PE ratio of 15.870x. SUN’s shares traded at $13.020 with a market capitalization of circa $16.93 billion as on 13 December 2018 (AEST 2:40 PM).
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