Speculation is again mounting that Westpac may be considering a sale of its life insurance assets.

Several media reports have said Westpac is having preliminary discussions with interested buyers but hasn’t made a final decision to sell its life arm. The deal may likely involve a long-term partnership with the buyer rather than a clean sale, one report says.

The Australian reported earlier this month that AIG is interested in the business and has held talks with Westpac.

Its life assets could be valued at close to $2 billion, the reports say. Rumours have been swirling since July over Westpac’s long-term plans for its life insurance business.

Ratings agency S&P Global is lowering its assessment of the life unit’s importance to the wider Westpac group because of the higher likelihood it will be sold.

Westpac’s decision to sell its financial advice arm – the main distribution channel for its life insurance – and the decision by the other major banks to exit life insurance has raised the chances that Westpac will follow suit, it says.

The Commonwealth Bank is the latest to jump off the life insurance bandwagon, selling CommInsure Life to AIA for $2.375 billion, and trying to offload its interest in Chinese insurer BoCommLife and its share in Indonesian life business PT Commonwealth Life.

The S&P Global report says it believes that Westpac’s life insurance business will face headwinds in the next few years, affecting its operations and profitability like it has other industry players.

“The life insurance industry in Australia is seeing regulatory changes, increased supervision from regulators on compliance and conduct, and scrutiny for product sustainability, in particular for disability income products.”

Westpac’s life business has strong operating performance, a solid market position and continues to outperform its peers, with lower lapse rates, S&P says.

BT’s life insurance quote and application software has recorded a 30% increase in adviser-generated quotes since it was launched in April this year. Westpac holds 9% of the life market, and in-force premiums in the first quarter of this year totalled $1.26 billion.