On Thursday, in a statement Australia’s Westpac Banking Corp said, it has decided to sell its lenders mortgage insurance (LMI) business to Arch Capital Group; the deal sees Arch Westpac becoming an exclusive LMI supplier for the next decade.
The sale, which is expected to close by this August end, marks the latest step in Westpac’s efforts to simplify its operations and cut costs by focusing on its core domestic and New Zealand businesses.
“The sale continues the simplification of our business and builds on our progress in becoming a simpler, stronger bank focused on consumer, business and institutional banking,” said Jason Yetton, chief executive, specialist businesses and group strategy.
Westpac is expected to record a loss on the sale, though the deal is expected to add about seven basis points to its common equity tier 1 capital ratio.
In a separate statement, Arch said it intends to combine Westpac LMI’s operations with its existing Australian LMI company, Arch LMI Pty Ltd.
Lenders mortgage insurance covers Westpac for any shortfall if a customer defaults on a home loan or if the proceeds from the sale of the property are not enough to pay off the loan.