Insurance giant Zurich is making a strong move to strengthen its business in Australia, lining up an acquisition of ANZ’s life insurance businesses, OnePath Life, in Australia for AU $2.85 billion (US $2.14 billion).
The acquisition will leave Zurich as the market leading retail life insurer in Australia and the company says this deal reinforces its strategy of “focusing on capital-light protection and unit-linked business, expanding bancassurance capabilities and reducing volatility.”
But a huge benefit from the deal for Zurich is the fact it includes a 20 year distribution agreement, that will enable Zurich’s life policies to be sold through ANZ’s bank network.
Zurich will gain access to ANZ’s 6 million customers, with touch points at 680 branches and over 2,300 ATMs, as well as digital distribution channels.
Zurich will have around a 19% share of the Australian retail life insurance market after the acquisition, as well as 6% of the group life market.
Jack Howell, Zurich’s Chief Executive Officer for Asia Pacific, commented, “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.”
The acquisition is to be funded from Zurich’s internal resources and senior debt, but the company will pay AU $1 billion of upfront reinsurance commissions, subject to regulatory approval in May 2018, with the remaining balance paid on completion of the deal.
“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 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.”