Westpac exits insurance businesses

The big four bank has sold Westpac Life-NZ-Ltd to Fidelity Life Assurance Company, New Zealand’s largest locally owned life insurer.

The two companies have also signed an exclusive 15-year agreement for the distribution of life products to Westpac’s local customers.

The sale price of around $373 million is expected to result in a post-tax gain on sale and add around 7 bps to Westpac’s common equity tier 1 capital ratio.

The transaction will also include ongoing payments from the distribution agreement to Westpac New Zealand.

Peter King, chief executive of Westpac, described the sale as a further milestone in building a simpler bank.

“This transaction is the latest step in simplifying our business while continuing to help customers with their life insurance needs,” Mr King said.

“Life insurance products are important for many New Zealanders, and we are pleased to be entering a long-term partnership with a life insurance specialist to continue to help our customers protect themselves and their loved ones.”

As at 31 March, Westpac Life-NZ had annual inforce premiums of NZ$149 million ($139 million).

The sale, subject to approvals, is expected to occur by the end of the year.

Westpac also recently completed the $725 million sale of its general insurance business to Allianz Australia.

The transaction included a 20-year exclusive arrangement to distribute general insurance products to Westpac customers.

More than 350 Westpac general insurance employees joined Allianz under the deal.

Richard Feledy, managing director of Allianz Australia, reported the company had become the country’s third largest insurer with the move.

But Westpac had reversed out of demerging from its New Zealand banking business, deciding to retain its ownership in late June.

Meanwhile, following a similar path to Westpac’s insurance sales, CBA sold its Australian general insurance business to South African insurer Holland Group in June and entered into a 15-year distribution deal.

The sales have aligned with the banks’ simplification strategies post-royal commission, with a trend of major institutions exiting their businesses in wealth and insurance in favour of focusing on their core banking and lending divisions.

[Related: Westpac Group to create 300 new Adelaide jobs]