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mort.detribpas.com. – Arch Capital Group Limited has completed the acquisition of Westpac Lenders Mortgage Insurance Limited. This Australian Prudential Regulatory Authority (APRA) approved captive lender Westpac Group provides LMI.
The combined company will continue to offer LMI to Westpac Group and will be the exclusive provider of new mortgage facilities for at least 10 years. Along with the deal Arch is also consolidating WLMIs existing operations and has announced the sale of its general insurance business.
In addition to the sale Arc has signed a 10-year supply agreement with WLMI. The transaction results in a higher Tier 1 capital ratio for Westpac Group. This bodes well for the Australian housing market where mortgage lending is one of the most important industries. This is an opportunity for Westpac to expand its insurance business and improve its market position in Australia.
Arch Capitals acquisition of WLMI is the right direction for the bank. It is the first time a major Australian financial institution has taken the initiative to acquire captives. WLMI will remain an independent APRA-approved company and will be Westpacs sole LMI supplier for 10 years. The acquisition will strengthen Arc Capitals position in the Australian market.
Arch Acquires Westpac Lenders Mortgage Insurance Limited
The transaction includes the purchase of Westpac Lenders Mortgage Insurance Limited from Arch Capital Group. Arch plans to merge WLMIs operations with Arch LMI Pty Ltd. WLMI will continue to provide LMI to the Westpac Group and will be the lenders sole provider of credit insurance for the next ten years. WLMI will retain existing risk through the acquisition of Arc and will continue to support existing insurance contracts with the Australian Economic Regulatory Authority.
The acquisition of WLM by Arch Capital Group is a major step for the banking sector. It will be the exclusive LMI service provider for the Westpac Group for ten years. It bears the risk and is independent of other lenders. The new partnership will combine the operations of the two companies. Also Arch makes the lenders mortgage insurance company. The agreement is expected to have a positive impact on both parties.
Arc has been active in the Australian market since 2011. Already in 2019 it was authorized by APRA to guarantee mortgage loans. The acquisition is from a combination of Arch LMI Pty Ltd and WLMI. While the merger is a big step for the Australian industry the LMI deal will make both parties more competitive. The merger was conducted by Arch LMI Pty Ltd. It retains its functions and the work of resurrection.
Arcs proposed acquisition of Westpac Lenders Mortgage Insurance Limited is expected to benefit the Australian LMI market. The transaction is subject to regulatory approvals and antitrust protections including the merger with Arch LMI Pty Ltd. This deal closes on August 31 2021. Additionally Arch expects to increase its total equity Tier 1 capital ratio by approximately 7 basis points. The deal is expected to boost the companys profitability.
The transaction was a reinsurance transaction between Arc and Westpac Group. Both companies will provide LMI to Westpac Group. The deal will incur a small annual fee for both companies. The new deal will also help Westpac make home ownership more affordable for all Australians. The merger of the two companies has several advantages. Proceeds from contract reinsurance contracts benefit APRAs clients as well as banks.
Through this activity the LMI team provides for each other. WLMI previously lent Westpac Groups residential mortgage portfolio to LMI. By joining hands with Arch LMI will be able to supply Westpac Group and Arch customers. This agreement is subject to various regulatory approvals. The new owners will have the new LMI product but Arcus will be responsible for the legacy issues.