WESTPAC Banking Corp has exited the life insurance sector, as it agreed to an A$900 million ($660 million) sale of its domestic unit to Japan’s Dai-ichi Life Holdings.
The deal underlines a rapid exit by Australian lenders from areas considered to be outside their core-banking operations, following increased regulatory scrutiny since a 2018 government-backed inquiry.
Companies including Macquarie Group, insurer Suncorp Group Limited and Wealth Manager AMP Limited have cut their exposure to insurance in the last five years.
The Chief Executive Officer of Westpac’s Specialist Businesses and Group Strategy, Jason Yetton, said the transaction was a step in simplifying the bank.
For Dai-ichi, the deal provides another avenue to boost its overseas business as Japan struggled with a declining population.
It had bought Suncorp’s Australian life insurance business for A$640 million in 2018.
According to the Japanese company, the deal fits its medium-term plans to increase the group’s profit contribution from its overseas life insurance businesses.
Westpac, which has already agreed to sell its general insurance and New Zealand life insurance arms, revealed that the deal would add about 12 basis points to its level 2 common equity tier 1 capital ratio.
The lender expects an after-tax accounting loss of about A$1.3bnon the sale, with about A$300m to be realised in its fiscal 2021 results.
The sale is expected to be completed in the second half of 2022.
The lender also said it signed an exclusive 20-year deal with Dai-ichi’s local unit, which insures more than 4.5m Australians, to sell life insurance products to Westpac’s customers.