Amid a crunch on profits in life insurance, CBA on Thursday said insurance specialist AIA Group would buy its life insurance business, with CBA to retain a 20-year partnership to distribute the products to its customers.

CBA had flagged it was looking to sell CommInsure in August while announcing a $9.9 billion annual profit.

The group executive in charge of wealth, Annabel Spring, is also set to leave the bank at the end of this year, CBA said on Thursday.

The sale comes after CBA's CommInsure business was last year found to have knocked back some customer claims on the basis of outdated medical definitions, leading to multiple reviews into the business, including from regulators.

Chief executive Ian Narev has said the sale is unrelated to these problems, saying it is selling the business because CBA's "competitive advantage" is in consumer banking, not life insurance.

"There is no way that the Commonwealth Bank, in achieving everything that we want to achieve, is ever going to manufacture, and invest, and innovate in insurance products as well as AIA," Mr Narev said.

Even so, he acknowledged the sale came after a challenging period for CommInsure and the broader industry, which has faced rising claim costs from income protection policies.

Velocity Trade analyst Brett Le Mesurier said CommInsure had battled an industry-wide slide in profitability in recent years, and last year's revelations it had rejected some claims on the basis of outdated medical definitions had created more problems for the business.

"The knocking back of claims, and the publicity and government interest which followed, made a bad situation worse for the company," he said.

AIA, which operates across the region and is listed on the Hong Kong stock exchange, is set to become the biggest provider of life insurance in Australia and New Zealand as a result of the deal.

Bill Lisle, regional chief executive of AIA, acknowledged banks and insurance companies were "very different businesses," and said AIA would be committed for the "long-term.

"Banking is normally a short-term approach, insurance is very much long-term. We take a 30, 40, 50 year approach when matching assets to liabilities," he said.

Chief executive of AIA in Australia, Damien Mu, said CBA had resolved the problems in its medical definitions, and committed that AIA would pay out all valid claims.

"We think a number of those issues have been resolved and it's something that industry needs to continue to make sure we eradicate," he said.

CBA said its existing customers' policies would be unchanged by the transaction, and customers would continue to be able to purchase life insurance products through the bank.

The sale does not include general insurance, and the CommInsure brand will be retained.

Banks including CBA, ANZ Bank and National Australia Bank are cutting back their presence in wealth management because of the lower returns in this business, which investors believe is not a natural fit with their core retail banking operations.

The wealth division of CBA has been hit by scandals in recent years including the provision of poor financial advice, and knocking back of some customers' insurance claims based on out-dated medical definitions. The sale also comes with the bank embroiled in allegations it repeatedly breached anti-money laundering laws. Mr Narev has announced he will leave the bank by the end of the financial year.

Under the deal, CBA will to continue to make revenue from distributing life and health insurance products through its vast retail banking network. CBA said that as well as the $3.8 billion sale price, it expected to receive a "pre-completion dividend," subject to conditions in the business.

CBA will gain an extra $3 billion in top tier capital from the sale, which will improve is Core Equity Tier 1 capital ratio by 0.7 percentage points. The bank said it would book an after-tax loss of $300 million on the sale due mainly to the carrying value of goodwill.

CBA on Thursday also told the market it had launched a strategic review of its asset management business Colonial First State Global Asset Management, which is also part of the wealth division.

This business has $219 billion in assets under management, and CBA said it would be looking at whether separately listing the asset management giant would deliver more shareholder value.

"The strategic review will consider a range of options, including an [initial public offering]" CBA said.