Zurich Insurance Group has entered into an agreement to acquire 100% of ANZ's life insurance businesses, OnePath Life, in Australia for A$2.85 billion (US$ 2.14 billion). The acquisition, when completed, will make Zurich the biggest retail life insurer in Australia.
Both parties expect the transaction, which is subject to regulatory approval, to be completed by the end of 2018.
The transaction price comprises A$1 billion of upfront reinsurance commissions, expected to be paid subject to regulatory approval in May 2018 with the remaining balance paid on completion.
“ANZ’s portfolio of non-traditional and profitable retail products fits well with Zurich’s strategy to focus on capital-light protection and unit-linked business. Furthermore, it strengthens the Group’s position in Asia Pacific, while building on our strong bank distribution capabilities,” said Zurich's Group CEO Mario Greco. “In addition, the existing portfolio provides a highly cash-generative business that will add to our cash remittances, increase our business operating profit after tax return on equity target by 50 basis points and support dividend growth beyond that implied by our existing plan.”
The acquisition is expected to contribute to the Group’s profitability from Day One, generating strong cash flows which will support future dividend growth. The transaction will also increase the proportion of stable life protection-based earnings, reducing overall Group earnings volatility and increasing the proportion of life earnings remitted as cash back to the Group.
20-year bancassurance pact
As part of the transaction, Zurich will enter into a 20-year distribution agreement with ANZ in Australia to distribute life insurance products through bank channels. Under this agreement, Zurich will have access to ANZ’s six million customers which are served through the bank’s more than 680 branches and over 2,300 ATMs, as well as digital distribution channels.
As a result of the transaction, Zurich will have an approximately 19% share of the Australian retail life insurance market, positioning it as the market’s largest retail life insurer. It will also have around 6% of the group life market.
Mr Jack Howell, Zurich’s CEO for Asia Pacific, said: “Zurich has earmarked the Asia Pacific region to be a major engine of growth in distribution and service capabilities, building on our recent acquisitions of Macquarie’s retail life insurance business and the Cover-More Group. Importantly, we are acquiring a profitable business with loyal customers and a track record of strong, stable cash flows.”
On a pro-forma basis, the operations to be acquired reported net earned premiums for the 12 months ended 30 September 2017 of $1.1 billion and a net profit after tax of $142 million.
Under the deal, ANZ will retain its New Zealand business along with its lenders mortgage insurance, general insurance distribution and financial planning arms.