Commonwealth Bank sells general insurance arm to Hollard

Under a $1bn-plus deal, Hollard will sell Commonwealth Bank home and car insurance products for the next 15 years.

Commonwealth Bank says the deal sets up a 15-year insurance alliance with Hollard. Picture: Bianca De Marchi

Hollard Insurance has promised to “reinvent’’ personal insurance products and use cutting edge technology to help process claims after buying Commonwealth Bank’s general insurance business for more than $1bn.

Hollard, which is better know for selling insurance under brands such as Woolworths, Medibank and Kogan will emerge as one of Australia’s five biggest insurers under a the CBA deal

CBA will take an upfront $625m payment for its CommInsure general insurance business, with the bank set to receive payments over the term of a 15-year alliance with Hollard, which would now write and distribute its home and car insurance products to CBA customers.

Payments from Hollard are set to top $1bn over the 15-year terms of the transaction, subject to conditions.

Hollard will also make additional investments throughout the 15-year partnership to “drive innovation and enhance the customer experience”, with CBA brand to remain, while the bank continue to earn revenue from the sale of insurance products.

A pre-completion dividend is also expected to be received by CBA.

Hollard managing director Richard Enthoven said the tie-up with CBA was an opportunity to shake-up personal insurance products and services.

“This partnership will allow Hollard to co-invest with CBA to innovate and deliver market-leading experiences for CBA customers,” Mr Enthoven said.

Mr Enthoven said he hoped to take the business to about $3bn in gross written product, up from the $2.4bn combined total of the two insurers

“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,” he added.

Mr Enthoven said Hollard was going to look closely at the way home insurance was designed and sold to insurers.

“We think there’s an opportunity to simplify that and make that a better customer experience.”

Mr Enthoven said Hollard was looking to keep as many of the 500 CommInsure staff as it could under the deal, which would see many corporate functions transferred to Hollard.

Hollard now has a team of 800 people across 20 distribution partners, with nearly 500 broker relationships in the Australian market.

Mr Enthoven said he hoped to ensure CBA staff, currently based in bank buildings, would have access to Hollard office spaces.

“We are buying this business to grow it; we’re entering this partnership to build it.,” he said.

CBA’s general insurance arm is a significant player in the insurance industry, taking in about six per cent of the overall market share.

Hollard also has a substantial market presence, providing several retailers, including Woolworths, Medibank and Kogan, white label insurance products.

Commonwealth Bank CEO Matt Comyn said the general insurance sale was “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,” he said.

Credit Suisse analysts welcomed the deal, noting it went some way to strengthen CBA’s balance sheet.

The sale to Hollard comes after several insurers kicked the tyres at CommInsure, with insurance rivals IAG, QBE, Suncorp, and Zurich all believed to have been in the race.

By concluding the deal to sell its general insurance arm CBA is also pushing further down its path to step away from insurance, after selling its life operations to AIA for $2.4bn in April.

CBA’s insurance divisions were subject to significant scrutiny before the 2018 Hayne Royal Commission into financial misconduct.

The deal, subject to approval from the Australian Prudential Regulatory Authority, is expected to take place in the 2023 fiscal year and comes after more than a year of CBA seeking a suitor.

Additional reporting: Lachlan Moffet Gray