CBA jettisons Indonesian life arm

Commonwealth Bank will pocket A$426 million from the sale of its Indonesian life insurance subsidiary after negotiating a sale of the business to the financial services arm of Hong Kong-based investment house Pacific Century Group.

The bank yesterday announced that it agreed to offload its 80 per cent stake in the life operation to Pacific Century's FWD insurance subsidiary.

The deal, which requires approval from Indonesian financial regulators, is expected to settle by the middle of next year.

CBA expects to record a post-tax gain of $140 million on the sale, which would boost its Tier 1 capital ratio by seven basis points.

Under managing director Matt Comyn the bank has moved aggressively to jettison insurance operations as part of a business simplification program.

The Indonesian operation is the fourth of the bank's insurance assets to be sold this year following announcements to offload life arms in New Zealand, China and Australia.

While the bank has already completed the sale of Sovereign in New Zealand to AIA Group, CBA is still waiting on regulators to approve the Australian and China divestments.

CBA is expected to harvest proceeds of close to $6 billion from the insurance sell-off when settlements for these deals are eventually completed.

FWD said it planned to rebrand the Indonesian business after regulators approve the deal, but also highlighted that it had negotiated a 15-year deal for PT Bank Commonwealth to distribute insurance products to its customer base.

Under the distribution deal the bank would receive incentive payments from FWD for originating new insurance business.

CBA said the Indonesian life arm currently services more than 400,000 policyholders.

The $426 million sale price represents a multiple of close to 17 times net profit for the 12 months to the end of June.

CBA scrip slumped 73 cents or 1.1 per cent to $66.61 on another bleak day of trading for bank stocks. ANZ and NAB closed at 12 month lows after posting even bigger falls.