Allianz vies for Commonwealth Bank’s $1bn insurance business

The CBA general insurance business is expected to sell for about $1bn, with the division believed to be better than that offered by Westpac last year. Picture: NCA NewsWire/Bianca De Marchi

A surprise entrant has turned up in the competition for the Commonwealth Bank’s $1bn general insurance business — Germany’s industry heavyweight Allianz.

Fresh from striking a deal to buy Westpac’s general insurance operations for $700m, Allianz has been working on an acquisition of CBA’s general insurance operation.

Final bids are due this month.

Last year, when Allianz was working to buy Westpac’s general insurance arm, Westpac tapped investment bank JPMorgan for advice.

However, its head of the financial institutions group for investment banking in Australia, Anthony Brasher, has jumped ship to Barrenjoey Capital.

Sources say that a good reason for CBA to sell the business to Allianz is that it can provide white label insurance products for Australia’s largest home loan provider.

Westpac and Allianz had a close relationship, with Allianz providing insurance products for the bank.

Should it win the CBA auction, there will be an opportunity to seriously increase its scale and strengthen its distribution channel in Australia, where it is already a big player.

In the Australian general insurance market, IAG has a 21.7 per cent market share, ahead of Suncorp with 12.4 per cent, Allianz with 7.8 per cent and QBE with 7.3 per cent, according to IBIS World.

Allianz has operated in Australia for some time, buying the Manufacturers Mutual Insurance business in 2000. It provides a variety of products, ranging from industrial risk to professional indemnity.

The CBA general insurance business is expected to sell for about $1bn, with the division believed to be better than that offered by Westpac last year.

Goldman Sachs is working on the sale.

IAG, advised by Bank of America, and the UBS-advised Suncorp are also bidders.

Earlier, the expectation was that IAG was the strongest contender, but Suncorp has also been gunning hard.

QBE is also said to be keen, but the company’s incoming chief executive Andrew Horton does not start until September and the company is being run by interim boss Richard Pryce. The board may not be prepared to make an acquisition until Mr Horton has taken the reins.

Gaining competition clearance from the Australian Competition & Consumer Commission is likely to be challenge for both IAG and Suncorp.

Earlier, DataRoom reported that the contest had narrowed to four parties, including IAG, Suncorp and Tokio Marine, which is advised by Macquarie Capital.

CBA offloaded a 55 per cent interest in its Colonial First State wealth management business to KKR for $1.7bn in May.