Suncorp Seeks To Double Life Insurance Business In Three Years
Banc-assurance group Suncorp-Metway is seeking to more than double the size of its current life insurance business over the next three years, as it expands its presence in direct sale and financial planning markets.
Geoff Summerhayes, chief executive of Suncorp Life says the insurer has managed to expand its presence in the independent financial advisory market, mainly through its Asteron brand.
Whilst building the brand, the Brisbane based insurer also began building a direct distribution platform and selling general insurance under the Suncorp, APIA and GIO brands.
“Our strategy is clear, we are on track and have made excellent progress.” Mr. Summerhayes said in a speech on Wednesday.
Suncorp has embarked on a strategy of revitalising the company by positioning itself as a multi brand financial services provider that offers banking, wealth management, life and general insurance, and has specifically targeted growth in the life insurance segment.
Mr Summerhayes said the division aimed to grow in-force premium by double digits on average over the next three years while aiming also to reduce costs.
Suncorp is also seeking to improve its claims experience by largely making improvements to the process.
Mr Summerhayes said the life insurance market had exceptional potential with double digit industry growth from the current $8.1 billion of in-force premiums.
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Competition Regulator Unlikely To Grant Approval For NAB Acquisition Of APH
According to investment bank Credit Suisse, the proposed acquisition of AXA Asia Pacific Holdings (APH) by National Australia Bank is likely to not be approved by the competition regulator.
Last week, NAB disclosed that it continued to remain in discussion with the Australian Competition and Consumer Commission, and third parties who were interested in acquiring APH’s North investment platform.
NAB hopes that a sale of the investment platform would help allay the competition regulators concerns that the lender would as a result of its acquisition end up dominating the retail investment market, despite receiving no assurances from the ACCC that such a sale would put its fears to rest.
NAB is negotiating with wealth management group IOOF, Bendigo and Adelaide Bank and Perpetual to sell the platform, which is expected to be discounted to attract a buyer.
Analysts at Credit Suisse say they believe any sale and resulting lease back arrangement would make NAB the single largest customer of any potential buyer, which would mean it would have undue influence over the pricing.
“We think that the ACCC will — rightly so — come under a lot of pressure for allowing the transaction to go through under such a scenario,” analysts said.
Additionally, analysts believe that the complexity involved in stripping out the asset from the NAB operation does not make it attractive to buyers.
“Finally, we urge investors not to forget that even if NAB manages to convince the ACCC, it still needs to get Treasury approval which is nowhere near a foregone conclusion in our view,” the analysts said.
Investment bankers say that it is becoming increasingly likely that NAB would have to raise dramatically the planned $1.5 billion capital raising to finance the APH transaction.
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Majority Of Australians Say They Support Superannuation Increase
A majority of Australians say they are in favour of the government’s decision to implement proposals that would increase the national superannuation rate, whilst more than half of all Australians say they are willing to sacrifice their wages to fund the measure.
The Australian Institute of Superannuation Trustees released the results of a poll over the weekend, which suggests that 77 per cent of workers say they support the gradual increase in superannuation guarantee from the current 9 per cent to 12 per cent by 2019.
More than half — 56 per cent — said they would be happy to pay for the 3 per cent increase out of their wages.
In its response to the Henry tax review, the government proposed a gradual increase in the compulsory superannuation guarantee rate over seven years to 12 per cent.
Fiona Reynolds, chief executive of the Australian Institute of Superannuation Trustees says the results of the poll should provide the impetus for the coalition to support the reform.
“It has taken a long time to get 12 per cent to the table. This is good social policy that deserves bipartisan support, particularly when the vast majority of Australians are backing it.” she said
The government also intends to cut the corporate tax rate from 30 per cent to 28 per cent to accompany the proposed increase, providing businesses the ability to fund the increased super contribution.
“According to the Australian Bureau of Statistics data, consumer price index growth has averaged 3.17 per cent per annum in the past 10 years to March, whereas average weekly ordinary time earnings have grown at 4.88 per cent per annum,” Mrs. Reynolds said.
“Since earnings have outgrown CPI by 1.71 percentage points each year, it’s hard to argue that an annual increase to the super guarantee by 0.25 per cent or 0.5 per cent would have a significant impact on an individual’s take-home pay.”
The survey of 1206 respondents, conducted at the end of May, included 728 full-time or part-time workers.
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NAB Willing To Sell Assets To Acquire APH
The bitter takeover battle for control of AXA Asia Pacific Holdings (APH) far from being over, after the competition regulator delivered its verdict, remains firmly in place with Australian banking major National Australia Bank (NAB) now negotiating a deal to sell the North Investment platform, in order to allay the regulators competition concerns.
Signalling its continued interest in being acquired by NAB, APH extended its exclusivity arrangement with the lender until June 15th.
Australia’s fourth largest lender has been by the Australian Competition & Consumer Commission on why it failed to grant approval for its initial bid worth some $14 billion.
NAB is understood to have entered discussions with IOOF and Tower to offload North, APH’s innovative investment platform, which is believed to be the key reason for the ACCC’s rejection.
The ACCC has still to make public the detailed reasoning behind its decision to disallow the proposed acquisition.
ACCC chairman Graeme Samuel has hinted however that a successful acquisition of APH by NAB would result in NAB also acquiring APH’s North platform which would mean the lender had far too much ownership of successful wealth management platforms.
Rival bidder, Australian wealth manager AMP remains interested in acquiring APH, and has continued its discussion with the target’s French parent AXA SA.
The price that the North platform may fetch has yet to be worked out, but The Australian citing unnamed sources said any deal was likely to be cheap.
The valuation of the platform is likely to be calculated in part based on whether any Axa-aligned financial planners that will use the platform move across as part of the transaction. Bankers last night said a potential buyer would be keen to inherit an established network of planners with an existing customer base.
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AXA Asia Pacific Holdings Says Open To New Bid From Jilted Suitor AMP
AXA Asia Pacific Holdings (APH), the target of an intense takeover battle between Australian banking major NAB and wealth manager AMP now says it is amenable to a new bid from jilted suitor AMP, which it would consider on its merits.
Last week, the Australian wealth manager said it had the flexibility needed to table a new bid for APH, but has yet to commit to a higher valuation than it has already put on the table.
Currently AMP values APH at $12.86 billion.
Rick Allert, chairman of APH, whilst speaking at the company’s annual general meeting on Tuesday said that any revised bid would be considered along normal lines.
“In the event that any new proposal is received from AMP, or anyone else for that matter, your independent directors will consider it on its merits subject to any legal restrictions under the current agreement with NAB and AXA SA,” Mr Allert told shareholders.
AMP’s rival for the acquisition of APH, NAB, had its higher valuation endorsed by APH’s independent board of directors, but was later rejected by the Australian Competition and Consumer Commission (ACCC) on the grounds it lessened competition grounds.
NAB says it is now considering all its options.
Mr. Allert added that he could not advise what the outcome would be, and it depended on the discussions and actions of the potential acquirers and regulators.
APH chief executive Andy Penn continued to make the point that the takeover battle had not become a distraction for the company.
“Our teams in Australia and New Zealand have been very focused on business as usual,” Mr. Penn told the meeting.
APH says it is optimistic about its future prospects, particularly due to the strength of the Asian economies, but added a note of caution, warning that economic and regulatory uncertainty continue to remain an issue.
“The outlook is very positive, however, the climate has changed in the wake of the global financial crisis and demand for regulatory change to address the perceived failings of the system has inevitably increased.” Mr. Penn said.
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Successful NAB Axa Bid Will Hurt Competition According To Report
A new report suggests that should National Australia Bank be successful in its bid to acquire Axa Asia Pacific Holdings (APH), it may result in rival bidder AMP remaining competitive force in the Australian wealth management segment.
The report, which was commissioned by AMP, and was undertaken by research firm Frontier Economics, found that NAB’s successful acquisition of APH would have significant negative market effects on AMP.
The Australian Competition & Consumer Commission (ACCC) is expected to announce its decision on the NAB bid this Thursday, but many believe the regulator will deliver its verdict even earlier.
The Frontier Economics report suggests that should NAB ultimately be successful in its bid to acquire APH, Australia’s fourth largest bank would come to completely dominate the wealth management sector.
Te report goes on to claim that the wealth management industry would come to be so concentrated around NAB, following the lenders acquisitions of MLC, Aviva Australia and JBWere, that AMP’s growth prospects might end up being stunted.
“A NAB acquisition would harm competition compared with an acquisition by AMP because it would lessen competition in the activity of wealth management. It would lessen the likelihood that AMP would remain a strong competitor because a NAB acquisition would decrease the likelihood that AMP would invest heavily in developing a leading-edge wrap platform to invest in funds. If AMP can acquire APH it will acquire the base from which it will be profitable for such investments to be made.” the report said.
The report added that consumers would suffer from less choice should the NAB bid be successful.
“A NAB acquisition of APH would mean that APH would become part of an organisation that was reluctant to engage in aggressive behaviour to any of its big four competitors. They all operate in a large number of banking and wealth management markets and if they behave aggressively in one they will invite retaliation in one of the markets in which they are less strong.”
NAB is apparently confident that the regulator will approve its bid but many believe that the competition regulator will extract its pound of flesh and force some concessions.
Federal Treasurer Wayne Swan must also give his blessings, and some suggest that he may be hesitant in doing so, due to sensitivity over the banking sector during an election year.
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Super Fund Industry Rails Against New Government Proposals- AGAIN
Once again, the superannuation sector is resisting government proposals that would change the industry, and is strongly dissenting against any move towards a compulsory government annuity scheme, in which retired investors can hand either all or part of their superannuation and receive an annual income.
The industry says any such measure would result in people being discouraged to save more for their retirement and would effectively act as a subsidy by the less well off for the wealthy, who tend to have longer life spans.
The Henry review of taxation, which recently released its interim report, which suggests that the government should run a mandatory scheme, which would allow Australians to pool part of their super, and would enable them to receive annual payments after retirement, which would be determined by the government.
The Henry review argues that such a scheme would mitigate against longevity risk, the risk that retired investors run out of fund in their retirement account before they die. The proposal would in effect prevent people from spending their savings to quickly.
John Brogden chief executive of the super fund industry association IFSA, quickly slammed the proposal, saying the scheme would suffer from too much complexity, it would be expensive to run, and could have a number of negative unintended consequences.
Mr. Brogden says that a uniformly priced annuity scheme operated exclusively by the government would reward people who lived longer and punish those with shorter lifespans.
“According to the Australian Bureau of Statistics, manual labourers do not live as long as office workers. So when the blue-collar and white-collar workers all put their lump sums in together, the blue-collar worker lump sum will spend its time subsidising the white-collar retiree once that blue-collar person dies.” Mr. Brogden said.
He went on to add that a mandatory government annuity program would seriously affect the level of confidence Australians had in their super, and discourage them from saving any more than the mandatory 9 per cent of their income.
“Such an annuity scheme will strongly discourage voluntary contributions into superannuation due to the harsh restrictions imposed on how those savings can be accessed in retirement,” Mr Brogden said. And he believes the temptation for the government to spend the money and then tax to get it back is high.
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AMP May Walk Away From AXA APH Deal
Australian wealth manager AMP is likely to walk away from the battle to acquire AXA Asia Pacific Holdings (APH), if the competition regulator decides the clear the way for NAB’s rival bid to acquire the company, The Australian is reporting citing an unnamed source familiar with the deal.
The source suggests that AMP is reluctant to engage NAB in a bidding war for the target, after its initial overture was rejected by APH’s independent directors. Contrastingly NAB’s rival bid has won the backing of the same board members and APH’s French insurer parent AXA SA.
AMP has said it is considering its position and awaiting a determination from the Australian Competition & Consumer Commission (ACCC) in relation to both its bid and that of NAB.
The competition regulator’s ruling on both bids is expected to occur on April 22nd, and if the regulator fails to approve NAB’s bid or places onerous restrictions on the acquisition, has the potential to place the ball back firmly in AMP’s court.
Last month the regulator delayed delivering a verdict, and this has led to speculation that it may block any deal initiated by NAB to acquire APH. The ACCC released a statement of issues which raised a larger number of concerns over the NAB bid than the AMP bid, particularly with the aspect of retail investment platforms.
APH’s French parent AXA SA currently owns 53.9 per cent of the company, and agreed a similar deal with NAB to the one initially struck with AMP, where it agreed to sell its entire stake in the company to the acquirer, whilst simultaneously agreeing to buy back APH’s assets .
Both NAB and AMP plan to hang on to the Australian and New Zealand businesses, and an acquisition would most certainly propel the former into a dominant market position in the life insurance and wealth management sectors in the two countries.
An NAB acquisition would be the largest transaction in the Australian financial services sector, larger even than Westpac’s 2008 acquisition of St. George for $12.37 billion.
Both deals also require the blessing of Federal Treasurer Wayne Swan and minority shareholders via a vote at a scheme meeting.
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NAB Finalises AXA APH Deal
Australian banking major, National Australia Bank (NAB) says it has finalised its acquisition bid for AXA Asia Pacific Holdings (APH), reaching agreement with APH’s French parent, that values its subsidiary at nearly $14 billion.
Yesterday it was revealed that all three companies involved in the transaction had signed binding agreements for NAB to acquire control of APH’s life insurance and wealth management businesses valued at $4.6 billion.
Under the terms of the transaction, NAB will acquire all of APH whilst simultaneously selling the targets Asia Pacific assets to French parent AXA SA for $9.4 billion. AXA SA will assume $700 million of APH debt, leaving NAB with a Australian businesses that carries no debt.
NAB will also take APH’s 50 per cent stake in the joint venture AllianceBernstein in Australia.
Yesterday NAB said it would raise the equity component of the deal for investors who chose the cash and stock option would miss its interim dividend.
Under the terms of the deal, NAB has bid $6.43 a share payable in cash or a combination of $1.59 in cash or 0.1745 NAB shares for each APH share.
Based on Monday’s closing price, NAB’s cash and stock bid is worth $6.42, and the lender warned that the stock component may be raised again if it felt the need to raise further equity to finance the transaction.
The decision to raise additional capital largely depends on the number of investors who chose the cash option.
The proposal “provides the opportunity to enhance the access to competitive wealth management products . . . it is also an attractive strategically aligned opportunity that enhances NAB’s activities in the growing wealth management industry”. NAB chief executive Cameron Clyne.
APH shareholders will be asked to approve the bid at a meeting expected in June.
For the transaction to be successful, an approval from the competition regulator is still required, and a decision from the ACCC is widely expected on April 22nd.
The ACCC has raised concerns that parts of the wealth management sector could become consolidated by the merger, but bankers expected the deal to be approved.
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NAB Places Customer At The Heart Of Its Growth Strategy
It has been a year since Cameron Clyne assumed the helm of Australian banking major National Australia Bank (NAB) and unveiled his “people’s bank” strategy, which was developed around the notion that lenders need to work hard in order to earn the respect of the communities they serve.
Despite placing the customer at the centre, there is no let up in the twin challenges faced by NAB which is the long term turnaround in the performance of the bank, and satisfying investors who seem to be impatient for results.
That makes no allowance for the bank’s poor performance over the last decade or more.
“If we don’t succeed on our (fair value proposition), someone else will, because the reality is it’s such a compelling proposition to provide a better deal for the customer. Every new entrant tackles an oligopoly from the customer angle, promising a better return for shareholders; no one comes in and says, `Your industry is not charging enough fees, so I’m going to charge more’. So retail banking will have to re-base to something consumers want. The worst outcome for shareholders would be an industry that charges on, and potentially invites regulation that will be far more onerous than if it actually engaged in some self-regulation.” Mr Clyne said during an investor conference held in Hong Kong.
NAB has very few options when it comes to strategy; certainly the status quo has failed to work in its favour. NAB’s retail franchise is relatively small compared to its big four rivals, some of whom have made impressive gains in the mortgage lending market, so clearly retail banking has scope for growth.
Consumer banking has not faced the same issues that have plagued corporate lending and it is a logical business for Mr. Clyne to focus his attention.
“If people are worried about re-basing the (retail) business model, we’ve already done it,” he said. “We are confident we’ll end up in a more sustainable position.”