The Westpac Banking Corp (ASX: WBC) share price is trading higher on Wednesday following the release of a positive announcement.
In morning trade, the banking giant’s shares are up 0.5% to $20.30.
What did Westpac announce?
This morning Westpac announced that it will sell its Westpac General Insurance and Westpac General Insurance Services businesses to Allianz for $725 million.
The two parties have also entered into an exclusive 20-year agreement for the distribution of general insurance products to Westpac’s customers.
According to the release, the sale price represents a multiple of 1.3x FY 2020 gross written premium and is estimated to result in a small post-tax gain on sale in FY 2021.
Management advised that the sale of its General Insurance business adds around 12 bps to Westpac’s common equity Tier 1 capital ratio.
In addition to this, the transaction includes contingent payments subject to integration milestones and business performance over the next five years. There are also ongoing payments in accordance with the distribution agreement.
Management notes that this new distribution arrangement expands its existing partnership with Allianz, which has seen Westpac distribute a range of Allianz’s products to customers including Auto, Travel, Boat, and Business insurance since 2015.
Westpac’s Chief Executive Officer, Peter King, believes the agreement was a significant milestone in the quest to build a simpler, stronger bank.
He commented: “This transaction is another step in simplifying our business while continuing to help customers with their general insurance needs.”
“General Insurance products are important for many Australians and we are pleased to be entering a long-term partnership with a global insurance expert to continue to help customers protect the things they value,” Mr King said.
Westpac will retain responsibility for certain pre-completion matters and provide protection to Allianz via a combination of provisions, warranties, and indemnities.
The bank is expecting the transaction to complete in the second half of 2021. Though, it remains subject to various regulatory approvals.