The Commonwealth Bank of Australia (CBA) is selling its 37.5 per cent stake in BoComm Life Insurance, which it jointly owns with China’s Bank of Communications, to Japan’s Mitsui Sumitomo Insurance.
Upon the completion of the sale, which is worth 3.2 billion yuan ($668 million), CBA said that it will record an after-tax gain of approximately $450 million, raising its common equity tier 1 capital ratio by 13 basis points.
“This transaction represents a further step in simplifying and focusing our portfolio and follows the announcement of the proposed sale of the group’s life insurance businesses in Australia and New Zealand to AIA Group, and the strategic review of the group’s life insurance business in Indonesia,” CBA CEO Matt Comyn said.
Before the transaction closes, the major bank said that it is also contributing 1.13 billion yuan ($235 million) to BoComm Life Insurance’s latest funding round, which will be fully reimbursed by Mitsui Sumitomo Insurance at a later date.
CBA said that the acquisition will satisfy a condition to the sale of its life insurance businesses in Australia and New Zealand to Hong Kong’s AIA Group announced in September 2017.
The big four bank could further raise an estimated $500 million if it sells its 80 per cent stake in Indonesian life insurer PT Commonwealth Life, which it appointed investment bankers to advise on in March.
Australian banks have been offloading their insurance and wealth businesses in recent years due to lower-than-expected returns and changing regulations.
Earlier this month, National Australia Bank (NAB) announced its intention to offload its wealth business, MLC, which it acquired from Lend Lease in 2000 for $4.6 billion. The transaction could be worth $3 billion, a significant drop from the price it paid.
NAB CEO Andrew Thorburn conceded in the financial services royal commission that the bank’s wealth management and financial advice divisions are exposing it to excessive complexity. This is, in turn, negatively impacting customer experience and increasing the bank’s costs, Mr Thorburn said, while contributing just 4 per cent to its total earnings.
ANZ also announced this month that it would be selling its 55 per cent stake in Cambodia’s Royal Bank to Japan’s J Trust in a deal that could result in a $30 million loss. ANZ’s group executive, international, Farhan Faruqui, said that the sale is in line with the bank’s efforts “to exit minority investments and partnerships to focus on [its] institutional business in Asia”.
Last month, Bank of Queensland also revealed that it would be selling its life insurance business, St Andrew’s Insurance, to Freedom Insurance Group for $65 million, which is expected to result in a post-tax gain of approximately $8 million.
[Related: CBA pays $5m in BBSW settlement]