ANZ Bank unveiled plans yesterday to offload its life insurance arm to Zurich for Aus$2.85bn (US$2.14bn), making the Swiss giant Australia’s largest retail life insurer by premiums.
It follows National Australia Bank selling most of its life insurance business to Japan’s Nippon and Commonwealth Bank shedding its insurance arm to AIA in recent years as Australia’s top lenders streamline operations.
ANZ said the sale of One Path Life Australia Holdings, subject to regulatory approvals, was another step in its strategy to create “a simpler, better balanced bank focused on retail and business banking in Australia and New Zealand”.
“From the outset we’ve been focused on partnering with a high-quality organisation culturally aligned to ANZ,” said ANZ’s Executive Wealth Australia chief Alexis George.
“We’re pleased we will be able to provide our customers with access to wealth products from one of the world’s leading and most respected global insurers.”
It described the deal as a good outcome for both customers and shareholders, citing Zurich’s “commitment to innovation and strong presence in Australia”.
It follows ANZ’s sale of its OnePath pensions and investments business to IOOF Holdings in October for Aus$975mn.
The bank’s shares were 0.44% higher at Aus$28.62 in afternoon trade.
All of Australia’s big banks are battling higher funding costs and lower interest margins, with rules now demanding they hold more reserves as a buffer against rising mortgage liabilities and fears over bad loans.
They also face a hefty new government levy to raise Aus$6.2bn over four years through a 0.06% charge on the borrowings of the big five – ANZ, Commonwealth, Macquarie, NAB and Westpac.
The Commonwealth sold its Australian and New Zealand life insurance business to AIA for US$3bn in September, while NAB received US$1.7bn from Nippon Life for an 80% stake in its insurance arm in 2015.
As part of the agreement, ANZ and Zurich will enter into a 20-year strategic alliance to offer life insurance solutions through ANZ’s distribution channels.
Following completion of the deal, funded through cash and debt and expected to be finalised late next year, Zurich will be Australia’s largest retail life insurer as measured by in-force premiums, with more than 1.5mn customers, or 19% market share.
The deal comes on the heels of a string of Asia-Pacific acquisitions by the Swiss firm, whose chief executive Mario Greco said it was a good fit for its growth strategy.
“ANZ’s portfolio of non-traditional and profitable retail products fits well with Zurich’s strategy to focus on capital-light protection and unit-linked business,” he said.
Zurich’s Asia-Pacific head Jack Howell said the region was an important market for the company. “Zurich has earmarked the Asia-Pacific region to be a major engine of growth in distribution and service capabilities, building on our recent acquisitions of Macquarie’s retail life insurance business and the Cover-More Group,” he said.
“Importantly, we are acquiring a profitable business (ANZ’s life insurance) with loyal customers and a track record of strong, stable cash flows.”
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