Westpac life insurance arm a likely AIG target

Westpac CEO Brian Hartzer. Picture: Hollie Adams.

US multinational finance and insurance corporation American International Group is believed to be eager to buy Westpac’s $1.5bn life insurance arm, and some say talks have already been held with the bank.

The speculation comes a week after The Australian revealed that Westpac had hired JPMorgan to look at the sale of the life insurance business, following the lead of its rivals.

While analysts believe the operation will probably be sold, given JPMorgan is on the ticket, others are not so sure, given the strong quality of the book.

AIG has been tipped as the strongest contender to secure the life insurance operation if it is cut loose from the bank.

Westpac chief executive Brian Hartzer has signalled he is open to a sale, but talk of a divestment comes at a time when some believe a fresh wave of CEO departures is on the cards at Australia’s top four banks.

One theory is that Mr Hartzer could leave in the short term, with David Lindberg as his logical successor.

Mr Lindberg is chief executive of the bank’s consumer division.

Before Mr Lindberg was appointed to the role in April, he was Westpac’s business bank chief executive.

Should it be the case that Mr Hartzer leaves, the incoming boss could opt to retain the life division.

It will also be interesting to see whether an exit by chairman Lindsay Maxsted is on the cards any time soon. Mr Maxsted has been in the job since 2011, so a departure by the boardroom veteran is unlikely to come as a major surprise.

Succession planning is also under the spotlight at rival ANZ, with some suspecting a changing of the guard involving chief executive Shayne Elliott.

In contention to replace Mr Elliott from among those already with the bank could be chief financial officer Michelle Jablko and digital banking chief Maile Carnegie, while from outside the bank Coca-Cola Amatil boss Alison Watkins is known to be close to ANZ chairman David Gonski.

With respect to Westpac, a potential sale of the division comes as a $600m equipment loans book is believed to be up for grabs and there are expectations that the bank will also sell its car and auto loans that it inherited from HBOS subsidiary Bankwest.

Australia’s big four banks are likely to sell more non-core assets as they move to streamline operations and narrow their focus on mortgages as more regulation is expected from the royal commission, which may offer buyout funds more opportunities.

ANZ is thought to remain eager to sell its UDC equipment finance business in New Zealand, although new capital requirements being introduced by the Royal Bank of NZ could be more onerous on UDC and, by reducing its return on equity, it could make the division a tougher sell.