Westpac keen to offload $700m general insurance unit before CBA embarks on same process

Westpac is expected to launch the sales process for its general insurance operations early next year, according to sources.

Westpac is expected to launch the sales process for its general insurance operations early next year, according to sources, when prospective buyers will be in a better position to focus on an acquisition of the business.

Groups expected to line up for the division include IAG, QBE, Zurich, Suncorp and Allianz.

IAG and QBE are without chief executives, while Suncorp boss Steve Johnston is relatively new in the role.

Experts predict that by next year, the companies will be better placed to make major strategic decisions.

Westpac has classified its general insurance operation as non-core and it is expected to be sold as rival CBA looks to offload its general insurance operations.

However, the Westpac operation, which some estimate to be worth about $700m, is considered to be more challenging to offload, and the plan is to get ahead of the CBA process.

Analysts estimate the CBA business is worth about $1bn.

Already, QBE and IAG are believed to have made their interest known in buying the general insurance operations.

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

IAG 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.

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

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.

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.