JSMedia – Westpac is selling its lenders mortgage insurance business to Arch, which has been performing reinsurance for the bank for over a decade. As part of the deal, Arch will take on Westpac’s Australian LMI responsibilities and will pay out a small annual payment to Westpac in return for the LMI business. The deal is expected to close by the end of August 2021, subject to regulatory approval.
Westpac will sell its lenders mortgage insurance business to Arch Capital, which will provide it with a 10 year exclusive supply agreement. The sale price will be book value, and the bank expects to record a loss in its current financial year. The sale will include a write down of $84 million on goodwill. The new company is a major player in the global mortgage insurance market, helping to make home ownership more accessible to borrowers and investors.
The deal is subject to various regulatory approvals and is expected to close by the end of the month. The deal is expected to reduce costs for both companies and Westpac. The new owners will retain the risk in force. However, the deal is not final, and the new owners will retain the liability. The acquisition is a major step in the development of the Australian financial services market. The new owner of the LMI business is Arch Capital Group.
Westpac Sells Lenders Mortgage Insurance Business
The deal is also expected to add seven basis points to Westpac’s common equity tier-one capital ratio. It is expected that the combined company will receive fixed payments of $84 million over the next 10 years. The reinsurance deal will provide an important service to Australians who are seeking to finance a mortgage. In addition to providing insurance, lenders mortgage insurance covers the shortfall between the lender’s payment and the property sale proceeds.
The deal will cost approximately $840 million and result in a loss for Westpac in the 2021 financial year. The company will take a $84 million loss as a result of the separation and transaction costs. It will also result in a $84 million goodwill writedown. This is a major step for the bank in its plans to focus on its lending operations. Aside from the loss in the current financial year, it will also help Arch in gaining market share for the lender mortgage insurance business.
The deal is expected to add seven basis points to the Bank’s Common Equity Tier 1 capital ratio. In addition, Arch will continue to provide reinsurance services to the WLMI business. It will also be a great move for both companies, as it gives a much-needed boost to the bank. Its continued relationship with Arch will provide more opportunities for the banking giant to serve its customers better.
Arch and Westpac are happy to extend their relationship. The two banks have been working together since 2011 to provide reinsurance services to WLMI. Nevertheless, the deal does not involve any merger and will be a long-term partnership. Both companies will continue to provide protection to their clients through their customary indemnities and warranties. It is expected to be completed by the end of August 2021.
Arch and Westpac have been providing LMI in the Australian market since 2011. Both companies will keep their existing risk in force. They will also continue to offer reinsurance for their existing customers. While the transaction is beneficial for both sides, the deal will create additional uncertainty for the market. Further, the acquisition will have an impact on the WLMI’s Australian operations. Once the deal is complete, the merger will be completed in the second half of 2018.
The deal between Arch and Westpac will see the bank merge its lenders mortgage insurance operations with Arch LMI Pty Ltd. The companies will continue to provide LMI to its customers, but will be exclusive to the Westpac Group for 10 years. It will be a good thing for customers, as they will be able to get a more comprehensive service. WLMI will be the exclusive provider of LMI in Australia for the next ten years.