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Research Update: Westpac Life Insurance 'A+' Ratings Affirmed After Announced Sale To TAL Dai-ichi Life; Outlook Stable

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Research Update: Westpac Life Insurance 'A+' Ratings Affirmed After Announced Sale To TAL Dai-ichi Life; Outlook Stable

Overview

  • We expect WLIS to maintain its robust creditworthiness under new ownership by TAL Dai-ichi Life. We view the ratings on WLIS as driven by its stand-alone credit profile, which is currently in line with its new ultimate parent and unlikely to be affected by the change in ownership.
  • While we view WLIS' strategic importance to WBC as having weakened following the announcement, we expect WBC will continue to provide a degree of support to WLIS up until the point of sale.
  • We are affirming our 'A+' financial strength and issuer credit ratings on WLIS.
  • The stable outlook on WLIS reflects our view that the insurer will maintain its superior operating performance and strong capital position over the next two years, subject to it maintaining its business and financial risk profile under new ownership.

Rating Action

On Aug. 10, 2021, S&P Global Ratings affirmed its ratings on Westpac Life Insurance Services Ltd. (WLIS; A+/Stable/--) following Westpac Banking Corp.'s (WBC; AA-/Stable/A-1+) announcement of its sale to TAL Dai-ichi Life Australia Pty Ltd. (TAL Dai-ichi Life; unrated). The outlook remains stable.

Rationale

The ratings on WLIS continue to be driven by its stand-alone credit profile, supported by its sound market position as the sixth-largest life insurer in Australia with strong operating performance relative to peers over the past five years. Under its new ownership, WLIS will maintain its bank distribution channel through an exclusive 20-year strategic alliance for providing life insurance products to WBC customers, Australia's second-largest retail bank. The ratings on WLIS are also supported by the insurer's capitalization levels, which we assess to be in the highest category under our assessment framework.

WLIS' prospective new parent, TAL Dai-ichi Life, is a fully owned subsidiary of Dai-ichi Life Group (A+/Stable/--), which is unlikely to impact the new subsidiary rating as it is at a commensurate level. However, we note the complementary nature of the WLIS and TAL Dai-ichi Life businesses, with the former being focused on bank direct and independent financial advisors, and the latter on group business. The transaction is expected to complete in the second half of the 2022 calendar year, subject to a range of regulatory approvals. While we now view WLIS as only moderately strategic to WBC, we expect WBC will continue to provide a degree of support to WLIS up until the point of sale if required, due to regulator expectations and ongoing customer overlap.

Outlook

The stable outlook on WLIS reflects our view that the insurer will maintain its superior operating performance and strong capital position over the next two years, subject to it maintaining its business and financial risk profile under new ownership.

Downside scenario

A lower rating is unlikely and would require a multi-notch downgrade in the stand-alone credit assessment and weakened expected extraordinary group support from either the current or prospective parent.

Upside scenario

In our view, we are unlikely to raise the rating on WLIS over the next two years.

Related Criteria

Ratings List

Ratings Affirmed

Westpac Life Insurance Services Ltd.

Issuer Credit Rating
Local Currency A+/Stable/--
Financial Strength Rating
Local Currency A+/Stable/--

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst:Kelvin J Bannan, Melbourne + 61 2 9255 9895;
kelvin.bannan@spglobal.com
Secondary Contact:Michael J Vine, Melbourne + 61 3 9631 2013;
Michael.Vine@spglobal.com

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