Zurich Financial Services has agreed to buy listed life insurer ClearView Wealth at an equity value of about $415 million.

The deal adds to a trend of consolidation in the Australian market after Nippon Life completed its acquisition of Resolution Life Australasia in October and combined the business with its MLC operations under the Acenda brand.

Zurich will pay 65c cash per stock for all ordinary shares on issue in ClearView Wealth through a scheme of arrangement, the two companies announced this morning.

The offer represents a 21.5% premium on ClearView Wealth’s closing price of 53.5c yesterday.

Zurich Australia and New Zealand CEO Justin Delaney says the deal combines his group’s “strong capital foundation with ClearView’s established in-market product and advice relationships, and represents a clear opportunity to develop the customer experience and competitive offering in the Australian life insurance market”.

ClearView Wealth says its directors unanimously recommend shareholders vote for the proposed buyout at a meeting expected to be held in August.

This support is contingent on no superior proposal emerging and an independent expert concluding the deal is in shareholders’ best interests.

Chair Geoff Black says the life insurer and Zurich are “highly complementary brands in life insurance and that, if the scheme is implemented, Zurich will be a great custodian to continue delivering ClearView’s ClearChoice product that protects what is most important to Australians.

“While we remain confident in the long-term outlook for the business and ClearView’s opportunity to continue its success, the scheme enables ClearView shareholders to realise full liquidity and certain value for their ClearView shares.”

The proposed deal will need regulatory clearance, including from the competition watchdog and the Australian Securities and Investments Commission, plus court approval.

ClearView Wealth is likely to provide more details at its half-year earnings briefing on Thursday.

A report in December by researcher IBISWorld said Zurich had a 5.2% market share, making it the fourth-largest life insurer in Australia, on revenue of $1.3 billion. TAL Dai-ichi Life leads the market, with a 13.8% share on revenue of $3.3 billion. 

The IBISWorld report says industry consolidation has changed competitive dynamics.  

“Life insurers have responded proactively to changing market conditions. Multinational firms backing major Australian insurers, including TAL and Nippon … have made a concerted strategic effort to expand and consolidate their policyholder pools across the Asia-Pacific region.

“Life insurers will continue to consolidate. The main catalyst for consolidation lies with banks and other major financial institutions, which are moving away from their life insurance divisions and selling to larger insurance companies.

“Nevertheless, repeated years of price-driven profitability have enticed more industry entrants.”

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