Westpac set to make decision on double life insurance asset sell-off for Australia and NZ units

Westpac may pull the trigger on separate deals for the sale of its New Zealand and Australian life insurance businesses in coming weeks.

Westpac is seeking to offload a string of non-core business units, including its life insurance arms. Picture: NCA NewsWire/James Gourley

Westpac is poised to rule off separate sale processes for its Australian and New Zealand life insurance units, which may see the bank pull the trigger on concurrent deals in coming weeks.

The NZ auction, being managed by JPMorgan which is also running the Australian life insurance sale, is in its final stages, sources say. It may see Westpac fetch as much as $NZ500 million ($465 million) for the life business across the Tasman.

Final bids were lodged on Friday for Westpac’s $1.78 billion Australian life insurance division, with Resolution Life and TAL, owned by Japan’s ­Dai-ichi, said to have submitted binding offers.

The likes of NZ’s Fidelity Life, Partners Life and TAL are being linked to Westpac’s Kiwi life insurance sale.

A Westpac spokesman declined to comment on either divestment process.

Tough conditions and the capital intensity of the life insurance industry have weighed on its performance.

Westpac’s business has deteriorated as it pulled back from parts of the market and shifted the division to its specialist arm.

Westpac’s total in-force life insurance premiums fell to $943m in the six months to March 31, from $1.2bn in the same period a year earlier.

In the second half of Westpac’s 2020 financial year, the bank outlined writedowns of intangibles reflecting a reduction in goodwill in the life insurance and auto businesses and writedowns and impairments of capitalised software. Some $406m of that related to the writedown of the life unit. The bank also identified a $260m reduction in non-interest income due to liabilities on disability insurance.

Some in the market estimate the bank may need to book further writedowns in the life business over the next 12 months.

Westpac is the last of the major banks to offload its life insurance operations, with its rivals already having retreated from the business in Australia and NZ.

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.

NAB got the ball rolling in the exit from life insurance in Australia in 2015, when it sold 80 per cent of MLC life to Japan’s Nippon in a $2.4 billion transaction.

ANZ completed its life divestment to Zurich in mid-2019 and Commonwealth Bank finalised the protracted sale of its life operations in Australia and New Zealand to AIA earlier this year.

Over the past nine months, Westpac, led by chief executive Peter King, has ruled off divestments for a number of divisions. They include agreeing to sell its general insurance operations to Allianz, and offloading its Pacific businesses to Kina Securities.

An announcement is also imminent on Westpac’s sale of its auto loans unit to Cerberus Capital Management, and the bank is also hoping to divest its ­investment platforms and superannuation businesses.

Westpac’s did decide last week against spinning off the bank’s entire NZ operations. The decision was said to reflect minimal upside to shareholders from a demerger and prohibitive costs.

At the time, Mr King said a NZ demerger would not be “in the best interests of shareholders”.

“Our review identified opportunities to improve service for customers and value across the WNZL business and we will progress these with the WNZL board and management team.”