Major bank sells LMI business

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 transaction sale price will be at book value, which will be determined at completion, which is expected to occur “by the end of August 2021”, subject to regulatory approvals.

The transaction also includes small, fixed annual payments to Westpac over the next 10 years.

Westpac said it would record a loss on the sale in the 2021 financial year as a result of separation and transaction costs, along with the $84 million write-down in goodwill that was announced with its 1Q21 update last month. 

The transaction is expected to add approximately 7 basis points to Westpac’s Common Equity Tier 1 capital ratio (on a pro forma 31 December 2020 basis).

“Westpac is pleased to be entering into a long-term partnership with Arch as LMI is an important product that helps the group make home ownership more accessible for more Australians,” said Westpac’s group chief executive specialist businesses and group strategy, Jason Yetton.

“The sale continues the simplification of our business and builds on our progress in becoming a simpler, stronger bank focused on consumer, business and institutional banking.” 

Westpac said it would retain responsibility for certain legacy matters and provide protection to Arch through a combination of customary warranties and indemnities. 

The new supply agreement builds on the group’s existing relationship with Arch, which has provided reinsurance services to WLMI since 2011.

The announcement comes just a day after the group revealed that it would be bringing together the leadership of its consumer and business divisions into a new Consumer & Business Banking division. 

The move, effective from 22 March 2021, aims to consolidate divisional management and “simplify the business”. 

The new division will be led by the current chief executive, consumer, Chris de Bruin. 

Given the change, Guil Lima, the current chief executive, business, will be leaving the group.

[Related: Genworth profits dive 190% amid COVID-19 crisis]