Westpac considers sale of life insurance unit

JPMorgan is working on a sale of Westpac’s life insurance business

Westpac’s life insurance business could be the next in the financial space to be offloaded, with some suggesting that Resolution Life is shaping up as a likely buyer.

Resolution Life has agreed to buy AMP’s life insurance business for $2.5bn and while the transaction has not yet been finalised, sources say the global life insurance group based in London is committed to proceeding with the acquisition.

The thinking is that Resolution will then acquire Westpac’s life insurance operation, which has been understood to be up for sale for some time. Resolution would then put the business into run-off mode where it writes no more insurance products.

Working on a sale for Westpac’s life insurance operation is investment bank JPMorgan.

Last year, US-based AIG was looking to buy the $1.5bn business, but has since walked away, while Japanese and European groups that were interested dropped out of the competition.

Should Resolution Life acquire the business, it is thought that it would only pay the embedded value for the operation, the valuation metric typically used for life insurance companies, so could be beaten by a buyer willing to offer a higher price, although few exist.

Yet Westpac could now be keen to clear the decks, setting up a ‘Specialist Businesses’ unit overseen by Jason Yetton.

Meanwhile, should AMP successfully divest its life insurance business, there is talk that it may buy Westpac’s Panorama wealth management platform.

Westpac has recently had Goldman Sachs helping it assess options for its wealth management assets, but is not thought to be officially appointed.

In theory, the two operations are a logical fit, with Panorama being the largest wealth management platform and AMP being the largest wealth management group.

However, operational challenges exist for AMP, which some say may need to raise about $250m of equity after calling off plans to sell its New Zealand wealth operations.

The Panorama technology is said to be better than AMP’s North platform.

Westpac, with its Panorama wealth management platform, is the largest platform provider in Australia. It has a 19 per cent market share, and it started a price war in 2018 by lowering its platform pricing.

Australia’s big four banks are likely to sell more non-core assets as they narrow their focus on mortgages as they wrestle with financial challenges linked to COVID-19, low interest rates and more regulation is expected from the royal commission.