Westpac sells NZ life insurance business

The $373m sale to NZ’s Fidelity Life comes as Westpac also weighs final bids for its Australian life division.

Westpac agrees to sell its NZ life insurance arm. Picture: NCA NewsWire / James Gourley

Westpac has signalled a gain on the sale of its New Zealand life insurance unit to Fidelity Life Assurance for $NZ400m ($373m), as it also weighs final bids for its larger Australian life division.

Westpac announced the sale in an ASX statement on Tuesday, highlighting it had also entered a 15-year distribution agreement with Fidelity for life insurance products to the bank’s customers.

The completion of the deal remains subject to regulatory and other approvals and is expected by the end of 2021.

The Australian revealed on June 27 that Westpac was nearing the separate sales of the NZ and Australian life insurance businesses, with Fidelity among the interested buyers for the Kiwi division.

Final bids for Westpac’s $1.78bn Australian life insurance division were lobbed on June 25 by Resolution Life and TAL, owned by Japan’s ­Dai-ichi.

Westpac said it expected the NZ life divestment to result in a post-tax gain on sale, and add about seven basis points to the bank’s common equity tier one capital ratio. The deal will include ongoing payments stemming from the distribution agreement.

Fidelity is NZ’s largest locally-owned life insurer, backed by the NZ Super Fund.

It also announced a separate transaction on Tuesday outlining that Ngāi Tahu Holdings, the investment arm of Te Rūnanga o Ngāi Tahu, would take a 24.9 per cent stake in Fidelity which would help fund its acquisition of Westpac’s NZ life unit.

The agreed sale comes as Westpac pushes ahead with a divestment spree to simplify the bank and retreat to its core businesses.

That follows a spate of scandals including a record penalty paid to Austrac last year, and more recently the bank launching court action alleging fraud against commercial affiliate Forum Finance.

Westpac chief executive Peter King said: “This transaction is the latest step in simplifying our business while continuing to help customers with their life insurance needs.

“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.”

Westpac Life NZ Ltd sits within the bank’s Kiwi operations. At March 31, the business had annual in-force premiums of $NZ149m

Fidelity’s chief executive Melissa Cantell said the transaction and distribution agreement with Westpac would allow the company to “leverage the investments” it was making across customer experience, data and technology.

In December, National Australia Bank announced an agreement to sell BNZ Life, its NZ life insurance business, to Blackstone-backed Partners Life for $NZ290 million.

The deal included a 10-year referral agreement for BNZ’s customers.

Westpac has ruled off divestments for a number of divisions in the past 12 months.

They include agreeing to sell its general insurance operations to Allianz, offloading its Pacific businesses to Kina Securities and divesting the motor dealer finance and leasing businesses to a firm owned by Cerberus Capital Management.

Westpac did, though, decide against spinning off its entire NZ operations.