CBA offloads home and motor insurance business

The Commonwealth Bank is selling its home and motor insurance business in a deal that could ultimately be worth $1 billion, further adding to the bank’s surplus capital amid predictions of a share buyback.

CBA on Monday announced the sale to privately-owned Hollard Group, which will pay the bank $625 million upfront, and also make unspecified deferred payments if the business hits certain milestones.

Hollard is also set to invest in the business over a 15-year strategic alliance, under which CBA will sell the policies through its vast branch network and its banking app. The bank, which has dumped non-core businesses including wealth management, life insurance, superannuation and financial advice in recent years, will receive a cut for distributing the insurance policies to customers.

Sources within the bank said the deal was likely to be worth about $1 billion over time.

CBA chief executive Matt Comyn, who has increasingly focused CBA on retail and business banking in his stint leading the company, said CBA and Hollard would co-invest in insurance products to meet the changing needs of customers.

“The transaction is consistent with CBA’s strategy to deliver differentiated customer propositions and the best integrated digital experiences,” Mr Comyn said.

CBA said the sale would result in a $400 million increase in its common equity tier 1 capital, and it would deliver the bank a post-tax gain of $90 million.

CBA was already holding more than $10 billion in surplus capital in May, and some analysts have predicted it will launch a multi-billion share buyback at its full year results in August.

CBA shares were down 4.1 per cent to $99.40 by mid-morning, as other major bank shares were more than 2 per cent lower.