One of the big four banks has announced that it will sell its lender’s mortgage insurance business to a global specialized insurer.
Westpac Group has announced that it will sell Westpac Lenders Mortgage Insurance Ltd (WLMI) to Arch Capital Group (Arch) and enter into a 10 year exclusive supply agreement for Arch to provide LMI to the group.
The sale price of the transaction will be at book value, which will be determined at the end, which should take place “by the end of August 2021”, subject to regulatory approvals.
The transaction also includes small fixed annual payments to Westpac for the next 10 years.
Westpac said it will post a loss on the sale in the financial year 2021 due to the separation and transaction costs, along with the $ 84 million goodwill impairment that was announced with the 1Q21 update last month.
The transaction is expected to add approximately 7 basis points to Westpac’s Common Equity Tier 1 capital ratio (orna pro forma 31 December 2020 base).
“Westpac is delighted to enter into a long-term partnership with Arch as LMI is an important product helping the group make home ownership more accessible for more Australians,” said Westpac’s CEO of the group of specialized companies and group strategy, Jason Yetton.
“The sale continues to streamline our business and builds on our progress in becoming a simpler and stronger bank focused on consumer, business and institutional banks.”
Westpac said it will retain responsibility for certain inheritance issues and provide Arch protection through a combination of customary warranties and indemnities.
The new supply contract builds on the group’s existing relationship with Arch, which has been providing reinsurance services to WLMI since 2011.
The move, effective March 22, 2021, aims to consolidate divisional management and “simplify business”.
The new division will be led by current CEO, consumer, Chris de Bruin.
Given the change, Guil Lima, the current CEO, business, will leave the group.
Annie Kane is the publisher of The Adviser and Mortgage Business.
In addition to writing about the Australian brokerage industry, mortgage market, financial regulation, fintech and the broader lending landscape, Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.