Canberra, Australia (CU)_ Commonwealth Bank of Australia (CBA) has reached an agreement with the South African-based Hollard Group to sell its Australian general insurance business CommInsure General Insurance. The deal comprises $625 million in cash upfront, as well as deferred payments and added investment by Hollard. CBA will also profit from the distribution of home and auto insurance products. As a result, CBA may get a pre-completion dividend. This payment will depend on the completion time of the project, the company’s financial performance, and regulatory approvals.
Based on Prudential Regulation Authority (APRA) accounting, the total transaction is expected to raise $400 million in Common Equity Tier 1 (CET1) capital, resulting in a pro forma uplift to the Group’s CET1 ratio of nearly 9 basis points. A post-tax gain on sale of about $90 million is expected, including post-tax separation and transaction costs of about $130 million. Approval by the Australian Prudential Regulation Authority is still required, and the transaction is expected to occur during the middle of 2022.
Matt Comyn, Chief Executive Officer, spoke about the new business. He said, “The transaction is consistent with CBA’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.”
Angus Sullivan, Group Executive Retail Banking Services, expressed optimism about the new venture. He said, “This long-term strategic alliance will bring together CBA’s number one mobile banking app and Australia’s largest branch network with Hollard’s innovative insurance products and enhanced claims technology, to deliver excellent experiences for our customers”.
Richard Enthoven, Managing Director for Hollard Holdings Australia, expressed delight over the new announcement. He said, “We are incredibly excited by today’s announcement. 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”.
