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 Under new CEO Andrew Thorburn, Australia's fourth-largest bank by
market value hopes to speed up the disposal of assets to help it
focus on its domestic and New Zealand franchises.
Last month, it announced plans to list U.S. bank Great Western
Bancorp Inc, adding that it could offload 100 percent of its
ownership over time. Expectations are also high that it will move to
sell its UK assets, Yorkshire Bank and Clydesdale Bank.
Melbourne-based NAB is likely to test potential buyer interest for
the life insurance unit before deciding whether to launch any formal
sale, the people said, adding that an advisor had yet to be
appointed.
Insurers from Japan, Canada, Hong Kong and Australia could be
interested in the business, they added.
A spokeswoman for NAB declined to comment. The sources declined to
be identified as the discussions were private.
A sale would come amid tougher times for much of Australia's life
insurance sector.
"There's a greater number of claims, the claims have been more
expensive and have taken longer to resolve, there’s been a greater
lapse in policies and reduced life insurance amount," said
Morningstar analyst David Ellis.
"It's a not a big issue for the major banks (but) it's not
immaterial."
NAB has said its life insurance business is "challenging" but has
not disclosed earnings for it.
MARKETING DEAL
NAB will likely negotiate a long-term marketing deal with the buyer
which would allow it to continue to sell insurance products under
its own brand, said one of the people familiar with NAB's thinking.
It would be a similar arrangement to its general insurance products,
which are underwritten by Allianz Australia Insurance Ltd. This
would help NAB take capital risks off its balance sheet while
ensuring customers don't defect to rivals.
As global capital rules become more onerous, banks are under greater
pressure to dispose of non-core assets and scale back capital
intensive businesses.
"For life insurance business you got to have scale and specialty,"
one of the sources said. "And historically general insurance has
outperformed life for the industry. So you would think hard if you
really want to be in this space."
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Asia has seen a pickup in so-called bancassurance deals over the
past three years, under which lenders sell their insurance
businesses and afterwards use their branch networks as sales
channels for insurance products sold by insurance companies.
NAB and other major Australian banks have notched up years of record
profits, helped by a focus on plain vanilla mortgages and business
lending. But NAB has underperformed its rivals, partly due to
problems at its UK businesses.
It has the worst return on equity among Australia's 'Big Four' banks
at 12.5 percent, lagging by far the 18.5 percent for Commonwealth
Bank of Australia according to Thomson Reuters Starmine. That
is, however, still better than the global average of 10.9 percent.
NAB acquired the life insurance business as part of its wealth
management division MLC, which it bought from Lend Lease in 2000 for
around $4 billion. The life insurance operations account for around
20 percent of MLC, the sources said.
NAB has no plans to sell the wealth management business, they added.
The bank's shares fell 1.4 percent to close at A$33.04,
underperforming a 0.7 percent decline in the benchmark Australian
share index.
(Reporting by Swati Pandey in SYDNEY and Denny Thomas in HONG KONG;
Editing by Edwina Gibbs and Ryan Woo)
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