JSMedia – Westpac has completed the sale of its Lenders Mortgage Insurance business to Arch Capital Group for $350 million. The deal involves an exclusive supply agreement for 10 years between the two companies. As part of the deal, Westpac will pay Arch a $52 million pre-completion dividend. The sale will add approximately three-quarters of a billion dollars to Westpac’s bottom line.
After the completion of the sale, Arch will continue to provide LMI services to Westpac. Under the deal, WLMI will retain all of its current risks. The new entity will be the exclusive LMI provider for Westpac for the next 10 years. The deal will also see the end of WLMI’s operations in Australia. The new owner will retain all existing LMI risk in force and be the sole LMI provider for the next decade.
The sale of LMI by Westpac was announced last week and is expected to take place in January 2019. The company will sell the business at book value and record a loss on the sale of LMI. The transaction involves a write-down of $84 million of goodwill and is subject to various regulatory approvals. This deal is expected to add about seven basis points to Westpac’s capital ratio.
Westpac Completes Sale of Lenders Mortgage Insurance to Arch Capital Group For $350 Million
The deal is expected to close by the end of August 2021. The company will retain responsibilities for certain legacy matters and will continue to protect Arch by providing reinsurance to the former WLMI. The transaction is expected to close by the end of 2021. This will ensure that Arch continues to meet its obligations in the future. This move will help the Bank to grow its business. It also will increase the company’s leverage by enhancing its position as the only global diversified insurer of mortgage credit risk.
The deal will be the best for both companies. Arch will continue to retain responsibility for certain legacy matters and the new company will be the exclusive provider of LMI for Westpac’s new mortgage originations. This will allow Arch to better serve the customer’s needs. The sale of Lenders Mortgage Insurance is expected to close by the end of August 2021. So, Arch will continue to provide Lenders Mortgage Insurance to the Australian market.
The sale of Lenders Mortgage Insurance will add a 7-billion dollar premium to the bank’s common equity Tier 1 capital ratio. The new parent company will combine WLMI operations with Arch LMI Pty Ltd. The deal will also result in a reduction of the company’s Lenders Mortgage Insurance cost. This will increase the firm’s competitiveness. It is a win-win for both companies.
Westpac’s sale of Lenders Mortgage Insurance was announced in May. The acquisition has been in the works for a while now. The transaction has been completed for more than 10 years and will result in a 7-billion-dollar gain for the bank. The deal will add seven-billion dollar value to the Westpac’s common equity Tier 1 capital. The transaction is expected to result in lower costs for Arch and a lower cost of Lenders Mortgage Insurance.
After completing the deal, Arch will continue to provide LMI to the Westpac Group. The new company will also acquire the reinsurance business of the former Lenders Mortgage Insurance. Despite the fact that Arch will not be the only Lenders Mortgage Insurance provider in Australia, it is an important acquisition for the bank. The deal will help both companies diversify their portfolios. For the Bank, the acquisition will result in more customers for both firms.
With the acquisition, Arch LMI will remain the dominant Lenders Mortgage Insurance provider in Australia. The deal will secure the future flow of WLMI’s LMI business from Westpac Bank. This transaction is subject to regulatory approvals and is expected to close later this year. The companies are already negotiating a deal for the new partnership. A successful merger will benefit the banks of both companies.