Commonwealth Bank of Australia (CBA) has agreed to sell its 80% stake in its Indonesian life insurance business, PT Commonwealth Life (PTCL) to FWD Group, for A$426m ($301m).
As part of the stake sale, CBA’s Indonesian banking business, PT Bank Commonwealth (PTBC) will distribute life insurance for FWD for 15 years.
According to CBA, PTCL customers will retain all of benefits in their existing policies. The partnership with FWD will offer PTBC customers to retain access to life insurance products.
PTBC president director and executive general manager Indonesia Lauren Sulistiawati said: “Providing our Indonesian customers with high quality products and services is core to our purpose to improve the financial wellbeing of our customers and communities.
“FWD is a leading pan-Asian insurance group and we are excited to work together to further enhance our life insurance product offerings and service to our customers.”
The transaction aligns with CBA’s strategy to focus on its core banking businesses and to develop simple and better banking services.
Subject to regulatory approvals in Indonesia, the transaction is expected to be closed in the first half of next year.
CBA stated that the consideration has a potential for additional payments payable over time, subject to performance of distribution partnership.
As per the partnership terms, PTBC will continue to earn income on the distribution of the life insurance products.
The Australian bank also stated that the total value is 3 times PTCL’s book value at 30 June, this year and 16.6 times PTCL’s normalised net profit after tax for the twelve months, at this June’s ending.
The bank expects to gain a post-tax gain of A$140m ($98.97m) and an increase of 7 basis points to CBA’s Common Equity Tier 1 (CET1) ratio as at 30 June this year.
FWD plans to rename the business, once the transaction is completed.
FWD Group CEO Huynh Thanh Phong said: “This is another exciting milestone in our journey to become a leading pan-Asian insurer that changes the way people feel about insurance. This acquisition will complement our existing business in Indonesia, providing new opportunities to continue to build our customer-led technology-driven strategy to embrace the enormous long-term growth potential in the Indonesian insurance market.”