QBE ‘chasing’ CBA, Westpac general insurance operations

QBE is considered to be sub-scale in the general insurance business in Australia and experts believe it is logical that it would remain keen to expand where they already have a brand presence.

QBE is believed to be in pursuit of the CBA and Westpac general insurance operations, collectively worth about $1.7bn, according to sources.

Both Westpac and its larger rival CBA are yet to appoint a banking adviser to sell the units, but they are said to be earmarked for sale.

Some estimate that the CBA operation could be worth about $1bn, while the Westpac division may yield about $700m for the banking group.

Also looking at the business is thought to be Australian listed insurer IAG and Allianz.

QBE is close to Goldman Sachs, Morgan Stanley and JPMorgan while IAG also counts Goldman Sachs as a close ally along with UBS.

IAG’s chief financial officer Nick Hawkins, who is one of the leading internal candidates to replace outgoing boss Peter Harmer, is understood to have flagged internally in a recent address to staff that merger and acquisition activity is on the agenda for the company.

The thinking is that an internal appointment is the most likely outcome when it comes to a replacement for the IAG’s Mr Harmer, say some.

IAG has had a mixed record with acquisitions, embarking on deals to expand into Asian markets before more recently staging a retreat.

One issue could be market concentration.

The Australian Competition and Consumer Commission may not take exception to a purchase of the operations by QBE, but for IAG, it may be another story.

QBE is considered to be sub-scale in the general insurance business in Australia and experts believe it is logical that it would remain keen to expand where they already have a brand presence.

Of the two operations, the CBA business is considered more attractive because the Westpac business does not underwrite motor insurance, which is handled for customers by German financial services provider Allianz.

A sale for CBA comes after it last month offloaded a 55 per cent interest in its Colonial First State wealth management business to Kohlberg Kravis Roberts for $1.7bn.

Westpac announced in May while delivering its interim results that it would create a “specialist businesses” division, overseen by Jason Yetton, along with other units that were non-core, such as insurance.

Previously, investment bank Morgan Stanley has had a role working on the auto loan assets, which were earmarked for sale, while JPMorgan had been hired to sell its life insurance arm.

The understanding is that Goldman Sachs is working on a possible sale of Westpac’s wealth management operations and may have even been discretely sounding out the market to test buyer interest.

Another bank may also be mandated to handle its Pacific Banking business.

Banks are searching for cash as COVID-19 and lower interest rates affect their profits.

They have been looking to divest non-core operations for some time as part of a trend towards simplifying their businesses following a royal commission into banking.