- Commonwealth Bank (CBA) sells its general insurance arm, CommInsure, to private insurance company Hollard Group for $625 million
- The two businesses will form a 15-year partnership under which CBA will distribute Hollard insurance products through its app and branch network
- As well as the $625 million upfront fee, Hollard will make deferred payments to CBA upon hitting some key business milestones over the coming years
- The transaction is set to be completed only after gaining Australian Prudential Regulation Authority (APRA) approval, slated at this stage for mid-2022
- Shares in CBA are down 5.04 per cent and trading at $98.45 at 1:55 pm AEST
Commonwealth Bank (CBA) is slumping on the ASX today after announcing the $625 million sale of its general insurance arm, CommInsure, to Hollard Group.
The nation’s biggest bank announced the CommInsure sale to investors this morning alongside a 15-year “strategic alliance” with the private insurance business.
Essentially, once Hollard takes control of CommInsure, it will also sell its home and motor insurance products through the CBA banking app and branch network. Commonwealth Bank will take a cut of the earnings for distributing the insurance products.
Commonwealth Bank chief Matt Comyn said the Hollard deal was consistent with the bank’s strategy to deliver “differentiated customer propositions and the best integrated digital experiences”.
“CBA and Hollard will co-invest in innovative, market-leading products and services that anticipate and meet the changing needs of our customers,” Mr Comyn said.
Mr Comyn has led Commonwealth through a string of business divestments and segment sales in recent years. Over the past 18 months, CBA has dumped non-core assets like its life insurance, superannuation, and wealth management divisions.
Hollard Australia Managing Director Richard Enthoven said the company was “incredibly excited” about the CBA partnership.
“The synergies between CBA and Hollard extend well beyond strategy and market segmentation,” Mr Enthoven explained.
“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.”
Under today’s purchase deal, Hollard will pay the $625 million fee upfront, with deferred payments to be made to CBA upon hitting some key business milestones over the coming years.
Commonwealth Bank said it expected the transaction to increase its common equity tier-one capital by some $400 million and bring about a post-tax gain of $90 million.
The bank said the deal was likely to be completed only by mid-2022, with Australian Prudential Regulation Authority (APRA) approval still needed before the transaction can be finalised.
It’s a brutal day across the board for the ASX financials sector, but Commonwealth Bank is faring the worst of the big four banks.
At 1:55 pm AEST, shares in CBA were down 5.04 per cent and trading at $98.45.