Race for Commonwealth Bank insurance unit nears finish line

Final bids for Commonwealth Bank’s insurance business were received on Monday in the Goldman Sachs-run competition. Picture: NCA NewsWire/James Gourley

An outcome in the competition for the Commonwealth Bank’s $1 billion general insurance business could be known within days, after final bids were received on Monday in the Goldman Sachs-run competition.

Suncorp is out of the race, leaving IAG and QBE as sure contenders.

Germany’s Allianz was known to have been in the mix a month ago, but there are queries on whether it remains a final contender, while others believe Japan’s Tokio Marine, which had made it through to the second stage of the contest and was taking advice from Macquarie Capital, is working with Hollard Insurance.

Tokio Marine formed a strategic partnership with Hollard in 2018 and purchased a 22.5 per cent interest in the South African-based insurer.

Paul Fahey, who runs Hollard Insurance, used to run CBA’s general insurance arm so would be familiar with the business.

Hollard has a reputation for not paying high prices in asset auctions, but Tokio Marine may give it the firepower it needs to take out its competitors.

In the Australian general insurance market, IAG, which is being advised by Bank of America, 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 IBISWorld.

Allianz last year purchased Westpac’s general insurance arm, which was up for sale through JPMorgan.

A challenge for IAG in the contest to grab CBA’s general insurance will be gaining clearance from the Australian Competition & Consumer Commission, say analysts.