Oh What a Lovely War......
Some years back in Australia and NZ, the banks declared war and entered the hallowed turf previously controlled by life insurance companies. By way of retaliation, a few of the larger life offices obtained banking licenses and went after the banks' market share of the retail banking industry.
To put it mildly, this was a mistake - in fact it was a stuff-up of monumental proportions that not only failed to challenge the traditional banks' hegemony, it exposed the life offices and made them vulnerable to take-over from the very banks the life insurers had been attacking.
Subsequent events are pretty well documented, with a number of life offices falling prey to the banks voracious appetites, and the previously held life insurers' values being absorbed into the banking fraternity's consolidated balance sheets.
Oh, what a lovely war, indeed - the life insurance companies were soundly defeated, and the banks rode off into the sunset with the glittering prizes, and that was that.
Or so we thought........
This week, Macquarie Bank has announced the sale of their life insurance entity, led at one time by Justin Delaney (now with TAL), who built an impressive award-winning organisation.
Zurich Life's acquisition of MacBank's life business may be symptomatic of a shift in the industry's tectonic plates in Australia which may have potential ramifications for NZ.
Previously, National Australia Bank announced the sale of MLC - a once industry-leading life company of many years standing.
Now there is much wailing and gnashing of teeth emanating from CBA over their failure to meet the expectations of their life insurance customers in Australia.
Could it be that the attraction of being in the life insurance product manufacturing space is wearing thin for the banks?
After all, didn't someone mention during the original due diligence process that quite a lot of these life insurance policies go hand-in-hand with all these pesky claims?
But is this the start of a trend for the banks to divest themselves of their life operations, and return to the distribution of third party products?
Ok - two transactions hardly represents a trend I hear you say - but there aren't that many major banks to choose from these days, even if there are still quite a number of smaller regional banks around Australia.
NAB and Macquarie represent some of the brightest and best of the bigger banks and their withdrawal from life insurance product provider status is significant.
And if CBA is confessing to letting down their life insurance customers as a precursor to tempting a response fromMet Life - a failed suitor for MacBank's life business - we may well see a trend being established that could have overspill to NZ.
The capital requirements in Australia are as stringent as any in the OECD, if not more so in the case of life insurance companies, and while the Australian banks all present strong balance sheets and solid trading results, there may be an anticipation of choppy seas ahead.
Are the recent transactions a sign of battening down the hatches?
And maybe the life companies merely lost a few battles all those years ago (correction - all of them!), and that the war is not yet over.
We may even see some life companies submitting tenders for the provision of white-labelled products for NAB and MacBank to distribute through their respective channels.
Any takers?
Slainte Mhaith (St Patrick's Day is almost upon us)
The Laird