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Westpac considers getting out of insurance

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Westpac is open to selling its general and life insurance businesses as the lender looks to put in more resources to rebuild its core banking operations.

The banking group revealed the possible divestment plan today in its half-year financial results, which show cash earnings tanking by 70% from a year earlier to $993 million and statutory net profit slumping 62% to $1.19 billion.

Westpac blames the poor results on the fallout from the virus pandemic disruption and impairment charges for a money laundering scandal.

Group CEO Peter King says the insurance units and other non-core operations such as superannuation will be moved to a new Specialist Businesses division with a strategic review of their future to follow in coming months.

“We have several businesses where we don’t have sufficient scale or where the returns are insufficient for the risk,” Mr King said. “These include wealth platforms, superannuation and retirement products, investments, general and life insurance and auto finance.

“These are good businesses with strong franchises and will benefit from being in their own division. Over the coming months, we will conduct a detailed strategic review on the best options for these businesses.

“This will include considering whether they would ultimately be more successful under different ownership.”

In the six months to March, the general insurance business recorded $273 million in gross written premium, up 5% from a year earlier. Higher insurance claims from severe storms and bushfires were a factor behind the 16% decline in overall non-interest income to $1.68 billion from the September half.

The lender has also reiterated its commitment to the Paris Agreement to reduce global carbon emissions, with plans to reduce its lending exposure to thermal coal to zero by 2030.