Zurich acquires ANZ’s life insurance business for $2.1bn

Swiss insurer Zurich has paid $2.1bn to buy ANZ’s life insurance business, catapulting itself into the number one slot in the Australian retail life insurance market.

Until now, Zurich has held the number five position. The insurer said the deal fits in with its strategy to expand in so-called capital-light life insurance products.

It is the insurer’s third acquisition in Australia in the past two years. In March last year it bought Macquarie’s life insurance business, while a year ago it paid $551m for Cover-More, a travel insurance business.

Zurich chief executive Mario Greco said: “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.”

The business being bought has about 1.5m customers. In the year to September it generated $1.1bn of premiums and net profits of $142m.

Under the terms of the deal, Zurich will be able to sell its products via ANZ’s 680 bank branches for the next 20 years. The Australian insurance market has been growing by about 10 per cent a year as the economy strengthens and more people buy insurance.

ANZ had already sold a chunk of its life insurance business, selling the pensions and investments part of the operation to IOOF for $765m in October.

Alexis George, head of ANZ’s wealth division, said: “This transaction will complete the simplification of ANZ’s Australian wealth business, however, we will continue to work hard to minimise any disruption to our customers during the transition.”

Shares in ANZ were up 0.7 per cent on Tuesday morning in Sydney, in a broader market that was largely flat.

The ANZ deal is the latest in a series of life insurance disposals by Australian banks. In September, Commonwealth Bank of Australia sold its insurance units in Australia and New Zealand to Hong Kong-based AIA for $3bn.

Zurich has raised its financial targets following the ANZ acquisition. The target for return on equity between 2017 and 2019 has been increased from at least 12 per cent to at least 12.5 per cent. The insurer has also added $225m to the $9.5bn cash generation target.

The company said the deal would be financed by cash and senior debt, and that its overall capital position would “continue to be very strong” after the deal.