While Commonwealth Bank of Australia (ASX: CBA) has recently been aggressively expanding its customer offerings from energy to retail aggregation to e-commerce to buy-now-pay-later, the group's longstanding insurance business with 800,000 policies nationwide will soon be in new hands.
CBA has entered an agreement to sell its CommInsure General Insurance to South African-owned insurance multinational Hollard Group for a $625 million upfront consideration, together with deferred earn-out payments and a 15-year strategic alliance with the buyer.
The partnership with Hollard means the new owners will still distribute home and motor vehicle insurance products to CBA's retail customers in Australia, with the agreement also including a commitment from both parties to make investments to drive innovation and enhance the customer experience.
CBA will continue to earn income on the distribution of these insurance products and is expecting a $90 million post-tax gain from the transaction, as well as an increase of approximately $400 million of Common Equity Tier 1 (CET1) capital.
"The transaction is consistent with CBA's strategy to deliver differentiated customer propositions and the best integrated digital experiences," CBA CEO Matt Comyn says.
"CBA and Hollard will coinvest in innovative, market-leading products and services that anticipate and meet the changing needs of our customers.
CBA's group executive for retail banking services Angus Sullivan says the 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.
Hollard Holdings Australia managing director Richard Enthoven says his team is 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," Enthoven says.
"Every deal Hollard pursues must align with our culture, values and purpose. In this regard, we felt a genuine connection with CBA.
"This partnership will allow Hollard to co-invest with CBA to innovate and deliver market-leading experiences for CBA customers."
The Australian branch of South Africa-based Hollard has more than 1.2 million customers, 800 employees and 20 distribution partners, compared to just three staff when it launched in Australia 22 years ago. The group is expected to generate close to $1.6 billion of gross written premiums (GWPs) in FY21
"It is an exciting move for us as it further strengthens Hollard's reach in the Australian Personal Lines market and marks our evolution from challenger brand to a position as a top five general insurer," Enthoven adds.
Completion of the transaction remains subject to approval from the Australian Prudential Regulation Authority and is expected to occur in mid-calendar year 2022.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support