Zurich Insurance Group (Zurich) has announced that it has entered into an agreement to acquire 100% of Australian banking giant ANZ’s life insurance businesses via its OnePath Life proposition, for AU$2.85bn (US$2.14bn).
Both parties expect the transaction, which is subject to regulatory approval, to be completed by the end of 2018. Zurich said in a statement announcing the deal that it hopes to become the leading retail life insurer in Australia as a result of the transaction. The agreement includes long-term distribution arrangements with ANZ, one of Australia’s main banks.
The transaction price comprises AU$1bn 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 chief executive officer 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 (BOPAT ROE) target by 50 basis points and support dividend growth beyond that implied by our existing plan.”
Zurich said that the acquisition is expected to contribute to the group’s profitability from day one and 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”.
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 6 million customers which are served through the bank’s more than 680 branches and over 2,300 ATMs, as well as digital distribution channels.
Jack Howell, Zurich’s chief executive officer 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.”
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. The agreement complements Zurich’s existing independent financial adviser (IFA) and bank distribution channels in Australia, the statement read.