Major Australian bank may give up stake in Indonesian venture

Bank poised to join industry trend of exiting insurance ventures to focus on core businesses

Major Australian bank may give up stake in Indonesian venture

Insurance News

By Gabriel Olano

Commonwealth Bank of Australia (CBA) is reportedly considering a sale of its majority stake in its Indonesian insurance joint venture, valued at up to US$250 million (SGD$332 million).

CBA, which is the largest lender in Australia, is in talks with several investment banks and is expected to bring in a financial adviser to determine the fate of its 80% stake in Indonesian insurer PT Commonwealth Life, Reuters reported.

This is part of CBA’s thrust to exit non-core businesses, and selling off its stake in the insurer could net the bank between US$200 million and US$250 million, sources said.

If the sale is successful, it will become part of a trend of Asia-Pacific banks divesting from the insurance sector to generate capital and focus on their core banking businesses, which are facing tougher regulatory capital requirements.

In September, CBA sold its insurance businesses in Australia and New Zealand to AIA for US$3.1 billion (SGD$4.12 billion). Malaysia’s AmBank is also considering a divestment of its general insurance holdings in order to focus more on banking, it was reported in December.

According to its website, PT Commonwealth Life operates in 20 Indonesian cities, employing over 5,000 sales staff serving over 500,000 individuals and group customers. In 2016, its premium income was IDR1.9 trillion (SGD$187 million), growing 4% from the previous year.

As the business is quite small, potential buyers of CBA’s stake are likely to be other foreign-owned insurers in Indonesia that want to increase their footprint in the most populous Southeast Asian country, the anonymous sources told Reuters.

In 2007, CBA raised its stake in PT Commonwealth Life to 80%, from a previous 50:50 joint venture with Indonesian firm PT Gala Arta Jaya.

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