Westpac’s eventful week continued as they announced that they had sold off their mortgage insurance business to Arch Capital, with Arch providing the function of Lenders Mortgage Insurance back to the group.
The news comes on the back of a week where they were given a reprieve from APRA over the AUSTRAC affair, set a new low interest rate for a Big Four bank and then released news of a major structural reshuffle in which they combined their consumer and business divisions, resulting in the departure of leading executive Guil Lima.
The sale of Westpac Lenders Mortgage Insurance Limited will see Westpac enter into a 10-year exclusive supply agreement in which Arch take onboard mortgage insurance duties for the Big Four bank. This deepens the relationship that the two have enjoyed for a decade, when Arch began performing reinsurance for Westpac.
The deal will be priced at book value from the time of completion, with Arch paying small annual payments back to Westpac over the course of their supply agreement. The sale has yet to go through regulatory approval, but it estimated that it will be complete by the end of August 2021.
Westpac expect that it will result in a 7 basis point rise in their Common Equity Tier 1 capital ratio, though they will record a loss on sale in this financial year from separation and transaction costs.
“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 Jason Yetton, Group Chief Executive Specialist Businesses & Group Strategy at Westpac.
“The sale continues the simplification of our business and builds on our progress in becoming a simpler, stronger bank focussed on consumer, business and institutional banking.”
