NAB’s seals major life reinsurance deal
National Australia Bank (NAB) has moved to give itself more flexibility in still problematic life/risk arena announcing today that its life insurance arm had entered into a reinsurance arrangement with a major global insurer for approximately 21 per cent of its in-force retail advised insurance book.
The major transaction, approved by the Australian Prudential Regulation Authority, was announced at the same time as the big banking group announced its half-year results entailing a 5.4 per cent increase in cash earnings and a 20.4 per cent increase in net profit attributable to owners of $3.44 billion. The board declared an interim dividend of 99cents per share fully franked.
NAB chief executive, Andrew Thorburn specifically mentioned NAB Wealth in his broader company analysis noting that measures taken to improve performance had seen cash earnings in the division continue to strengthen with an increase of 28 per cent.
"In October 2014 we highlighted that while we remained committed to distributing wealth products, recent regulatory changes had prompted us to evaluate options to improve overall returns from our Wealth business," he said. "We have announced today a reinsurance agreement which is an important step towards achieving these goals, releasing $500 million in capital."
In the specific announcement of the reinsurance arrangement, the NAB announcement said that it reduced the Group's exposure to retail life insurance while maintaining distribution of life insurance products and services to the Group's customers.
The announcement, released to the Australian Securities Exchange, said that NAB Wealth cash earnings had increased 28.2 per cent to $223 million reflecting improved results from both the investments and insurance businesses, and lower operating expenses.
The bank's commentary today also pointed to its continuing exit from its United Kingdom banking businesses, with Thorburn saying that NAB had been examining a broad range of options, including those provided by public markets.
"It is a priority to exit this business, and we are today announcing our intention to pursue a demerger and Initial Public Offering of the UK Banking business," he said.
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