CBA divests last non-core business
On Monday Commonwealth Bank announced it would sell its Australian general insurance business (CommInsure) to the Hollard Group, and establish an exclusive 15-year strategic alliance with the global insurer for the distribution of home and motor vehicle insurance products to CBA’s retail customers in Australia.
The transaction consideration includes $625 million of upfront consideration, together with deferred payments (payable upon achieving certain business milestones) and additional investment from Hollard throughout the 15-year strategic alliance to drive innovation and enhance the customer experience. CBA will also continue to earn income on the distribution of home and motor insurance products.
Upon completion, which is currently expected to occur in mid 2022, the transaction is expected to deliver an increase of approximately $400 million of Common Equity Tier 1 capital, resulting in a pro forma uplift to the CBA’s CET1 ratio of approximately 9 basis points, on an Australian Prudential Regulation Authority (APRA) basis, as at 31 March 2021.
The transaction is also estimated to result in a post-tax gain on sale of approximately $90 million, which includes estimated post-tax separation and transaction costs of approximately $130 million.
Chief Executive Officer, Matt Comyn, said: “The transaction is consistent with CBA’s strategy to deliver differentiated customer propositions and the best integrated digital experiences. CBA and Hollard will coinvest in innovative, market-leading products and services that anticipate and meet the changing needs of our customers.”
Managing Director for Hollard Holdings Australia, Richard Enthoven, said: “The synergies between CBA and Hollard extend well beyond strategy and market segmentation. We have a shared vision for the future of home insurance, the potential for better customer outcomes, and an exciting role for digital innovation along our entire value chain.”