The Westpac Banking Corp (ASX: WBC) share price is on watch today after the bank announced the sale of its New Zealand life insurance business.
Westpac’s latest business sale
The major ASX bank announced it has agreed with Fidelity Life Assurance to sell Westpac Life New Zealand as well as entering into an exclusive 15-year agreement for the distribution of life insurance products to Westpac’s New Zealand customers.
The sale price is NZ$400 million, which is approximately $373 million. It’s expected to result in a post-tax gain on the sale and add around 7 basis points (0.07%) to Westpac’s overall common equity tier 1 (CET1) capital ratio. That means it will have more capital on the balance sheet.
This transaction will also lead to ongoing payments from the distribution agreement regarding Westpac New Zealand.
Fidelity Life Assurance is New Zealand’s largest locally owned life insurer, backed by cornerstone investor, the NZ Super Fund.
Westpac said this business is part of the NZ operations. As at 31 March 2021, it had annual inforce premiums of NZ$149 million ($139 million).
The deal is subject to various approvals and is expected to complete by the end of 2021.
Management comments
Westpac CEO Peter King said the sale was a further milestone in building a simpler bank:
“This transaction is the latest step in simplifying our business while continuing to help customers with their life insurance needs.
“Life insurance products are important for many New Zealanders and we are pleased to be entering a long-term partnership with a life insurance specialist to continue to help our customers protect themselves and their loved ones.”
Summary thoughts about Westpac and the share price
Westpac shares are up today, though so are the other big banks, so I’m not sure how much shareholders taking this news into account.
A strong balance sheet is of course a good thing for Westpac. It may end up with so much capital that a capital return to shareholders might be appropriate. But that’s a one-off. The more important thing is that profit is recovering.
There may be other ASX dividend shares that can produce consistent income over time though.
