For Sale - but who's buying?

The announcement that CBA is looking at selling off their wealth and insurance management interests in Australia and New Zealand is hardly surprising.

NAB has already sold off MLC, Macquarie Bank got rid of their Life Company to Zurich, and ANZ Bank released a similar statement to CBA a few weeks ago.

So it seems that the Banks are seeking to release pressure on reserves to meet Basel IV capital requirements and change the method by which they provide wealth and insurance services to consumers. This is now more than just a trend in the Australian banking sector, and add to the equation the reputational risk created by recent high profile criticisms of the banking wealth and risk management operations, then the latest announcement should not be a surprise.

However, in Australia - given the market scale and obvious competitor 'synergies' - there were buyers in waiting. And there's no doubt that the statement from CBA, in line with ASX requirements, is not a whimsical or conceptual consideration. There will be conversations taking place at a reasonably advanced stage before such a statement has been released.

But in NZ - again given the relative lack of scale - buyers are not so obvious.

Over the past 12 months, I have received contact from Asian-based Consultancy Firms requesting information on behalf of clients expressing interest in the NZ life insurance market. This has taken the form of an online interview - basically a Q & A session on key aspects of the life insurance industry, legislative measures, regulatory environment, distribution, profitability, etc. While the client identity remains undisclosed around these interviews, it's fair to assume that these clients are of a sizeable nature.

So there may possibly be overseas interest in Sovereign - and as a matter of pure speculation, I  notice that Prudential in the U.K. has been raising considerable sums of cash by selling off some product lines. It has also been suggested that AIA has been analysing the ANZ offer of sale in Australia. AIA has progressed considerably since exiting the AIG stable and most certainly has the resources to become an even more significant player in the Australasian market by acquisition rather than the slower route to prominence by generic growth. But is there an appetite? Only time will tell.

But beyond that speculation - and that's all it is at this stage - which entity would or could contemplate a purchase of Sovereign? With the Banks heading in the opposite direction, and other domestic life companies too small to be presenting a credible offer, it's hard to avoid a couple of conclusions - namely, any sale won't happen in the immediate future, and the buyer - if any - will be an overseas entity.

In the meantime, I'd suggest that the impact on Advisers will be negligible. Despite some claims to the contrary, Sovereign is no longer the leading product provider to the independent adviser market. (I claim the right to use that term - an adviser with no exclusive contractual obligation to one product provider - my definition, my blog!)

That mantle has long since passed to a combination of Fidelity, Partners Life, and Asteron, with AIA following on behind.

Changed days, indeed, from the early day revolution that Sovereign fomented by turning the distribution of life insurance products in the NZ market on its head. Revolutions, of course, have a finite life span and with most of its new business emanating from the shareholder these days, the reduction in market share from the independent market has been inexorable.

The impact on policyholders will also be minimal if any. Sovereign's position in the market is just too significant to have policyholders suffer any adverse effects from a transfer of ownership, and I suspect the RBNZ will be tracking developments very closely.

Truly. nothing is constant but change itself.


The Laird