SYDNEY, Dec 12 (Reuters) - Australia’s MLC Life Insurance plans to push into the group life insurance market and make its pricing more competitive now that it is more independent from shareholder National Australia Bank Ltd (NAB), its chief executive said.
NAB sold 80 percent of MLC Ltd, operator of the country’s fourth-largest life insurer, to Japan’s Nippon Life Insurance Co for A$2.4 billion ($1.79 billion) in a deal that closed in October.
The sale came as banks re-focus on businesses generating higher returns and on building capital needed to meet regulatory requirements. Last month, Australia and New Zealand Banking Group Ltd said it was considering selling its A$4.5 billion life and wealth insurance division.
In a phone interview with Reuters, MLC Life Insurance CEO David Hackett said the switch from being a bank-owned insurer to a standalone business with a lower cost of capital had resulted in a change in strategy.
NAB, like its banking rivals, has a large retirement fund business that competes against not-for-profit industry funds.
Now MLC Life is run separately from NAB and has a more independent board, it can push to secure industry funds as group life insurance clients, Hackett said.
“We are being welcomed in by the industry funds as a credible alternative,” he said. “It is a great opportunity for us to become a much stronger player in that market and provide more choice to the funds.”
Hackett said Nippon Life’s aspirations for MLC Life include overtaking AMP Ltd to become Australia’s third-largest life insurer, which he said could occur next year based on current growth trends.
“The hurdle rates that we’ll be looking to achieve in the business are now I think going to be more competitive and will give us more competitive pricing than we could achieve as NAB,” he said.
Market leader TAL Life Ltd, owned by Japan’s Dai-ichi Life Holdings Inc, commands 17 percent of Australia’s life insurance market, followed by Hong Kong’s AIA Group Ltd with 13 percent. AMP and MLC Life each hold around 12 percent. ($1 = 1.3417 Australian dollars) (Reporting by Jamie Freed; Editing by Christopher Cushing)