Westpac will sell two general insurance businesses to German insurance giant, Allianz for $725 million.
The sale came a day after the bank was criticised by the key regulator, APRA, over “material breaches of liquidity standards in 2019 and 2020.”
The two events are not connected.
Westpac says the sale will result in a small profit in the current half but did not quantify the size.
The sale includes a 20-year agreement for the distribution of insurance products to Westpac’s customers and will bolster the bank’s capital position by around 12 points.
Westpac already has an existing partnership with Allianz, which has seen the bank distribute a range of Allianz’s products to customers including Auto, Travel, Boat, and Business insurance since 2015.
Westpac Group Chief Executive Officer, Peter King, said the agreement was a significant milestone in building a simpler, stronger bank. “This transaction is another step in simplifying our business while continuing to help customers with their general insurance needs.
“General Insurance products are important for many Australians and we are pleased to be entering a long-term partnership with a global insurance expert to continue to help customers protect the things they value,” Mr. King said.
Westpac will retain responsibility for certain pre-completion matters and provide protection to Allianz via a combination of provisions, warranties, and indemnities.
Completion of the transaction is subject to various regulatory approvals and is expected to occur in the back half of 2021.
Westpac shares fell, then rebounded a little to close up by the tiniest margins – 0.01% at $20.30.