Mortgage

Westpac Completes Sale of Lenders Mortgage Insurance to Arch Capital Group For $350 Million

9 February 2023 comments off

mort.detribpas.com – Westpac has completed the $350 million sale of the lenders mortgage insurance business to Arch Capital Group. The deal includes a 10-year exclusive supply agreement between the two companies. As part of the deal Westpac will pay Arc an upfront dividend of $52 million. The sale would add about three-quarters of $1 billion to Westpacs profits.

Following completion of the sale Arch will continue to provide LMI services to Westpac. WLMI bears all damages under the contract. The new entity will be Westpacs sole LMI service provider for the next ten years. The transaction also ends WLMIs operations in Australia. The new owners assume all LMI risks and remain the sole LMI provider for the next ten years.

The Westpac LMI sale was announced last week and is expected to close in January 2019. The company will sell the business at book value and record a loss on the LMI sale. The transaction includes an impairment charge of $84 million for goodwill and is subject to various regulatory approvals. The deal is expected to add about seven basis points to Westpacs capital ratio.

Westpac Completes Sale of Lenders Mortgage Insurance to Arch Capital Group For $350 Million

Mortgage Insurance to Arch Capital Group For $350 Million

The transaction is expected to close in late August 2021. The Company will retain responsibility for specific legacy issues and continue to protect the legacy WLMI by providing Arch Maintenance. The project is expected to be completed by the end of 2021. This will ensure that Arc continues to meet its future obligations. This step will help the bank to expand its business. It will also increase the companys leverage by strengthening its position as a globally diversified raiser for mortgage credit risk.

This transaction would be the best for both companies. Arch will retain responsibility for certain property matters and the new company will be the exclusive LMI provider for Westpacs new mortgage originations. This will allow Arc to better serve the needs of its customers. Lenders will stop selling mortgage insurance by the end of August 2021. Arc will therefore continue to provide lenders mortgage insurance to the Australian market.

Selling the lenders mortgage insurance will add a $7 billion premium to the banks Tier 1 common equity ratio. The new parent company will merge WLMIs operations with Arch LMI Pty Ltd. The deal will also reduce the companys lenders mortgage insurance costs. It will increase the competitiveness of the company. Its a win for both companies.

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The sale of Lenders Mortgage Insurance to Westpac was announced in May. Editing has been in the works for some time. The deal which has been in the works for more than a decade would net the bank $7 billion in profits. The transaction will add value to Westpacs $7 billion common core capital. The deal is expected to reduce Arcs costs and the lenders mortgage insurance costs.

After the transaction closes LMI will continue to be part of the Westpac Group. The new company will also take over the previous lenders mortgage insurance offset business. Arch is not the only provider of mortgage insurance in Australia but it is a significant bank acquisition. The deal will help the two companies diversify their investment portfolios. The bank was shopped with most customers in both countries.

With the acquisition Arch LMI will remain the leading provider of mortgage insurance to lenders in Australia. The transaction secures WLMIs future LMI business from Westpac Bank. The transaction is subject to regulatory approval and is expected to close later this year. The companies are already negotiating a new partnership agreement. A successful merger will benefit both banks.

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