Fitch: ANZ's Life Insurance Sale to Support Credit Profile
(The following statement was released by the rating agency) SYDNEY, December 11 (Fitch) The sale of Australia and New Zealand Banking Group Limited's (ANZ; AA-/Stable) life insurance business, announced today, will support the bank's credit profile by improving its capital position, although this may be offset by a return of capital to shareholders, says Fitch Ratings. We expect the divestment to bolster the bank's resilience to downturns, but it will not affect its ratings. Fitch sees ANZ's announcement as part of the wider banking-industry trend of refocussing on core operations amid increasing capital requirements and life-insurance sector challenges. We consider the exiting of non-core businesses by the major banks as positive, since it frees up management time and allows the banks to make better use of their strong banking franchises in Australia and New Zealand - their key competitive advantage. Zurich Financial Services Australia intends to acquire ANZ's life insurance business for total consideration of AUD2.85 billion. The transaction does not include the New Zealand life insurance business and ANZ will retain lenders' mortgage insurance, general insurance distribution and financial planning. The sale, which ANZ expects to be completed in late 2018, is subject to regulatory approval. The sale agreement includes ANZ entering into a 20-year alliance to offer life insurance solutions through its distribution channels. ANZ's life insurance business contributed pro forma cash net profit after tax of AUD189 million in the financial year ending September 2017. This transaction, combined with other asset sales already announced by ANZ, enlarges the bank's buffer above the Australian Prudential Regulation Authority's "unquestionably strong" common equity Tier 1 (CET1) ratio target of 10.5% to be implemented from January 2020. ANZ's CET1 ratio was 10.6% at end-September 2017 and this transaction will add 65bp on a pro forma basis. It is possible that ANZ will return some or all of this capital to shareholders, particularly as organic growth is unlikely to require all of the additional capital, but we do not expect its CET1 ratio to fall below the "unquestionably strong" level. Contact: Bert Jansen Director Financial Institutions +61 2 8256 0345 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney Australia 2000 Tim Roche Senior Director Financial Institutions +61 2 8256 0310 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.