Westpac is to take over the life insurance business of its funds management arm BT in a move to centralise its operations.

A BT spokesman told insuranceNEWS.com.au the move is being made by Westpac Life to “create operational efficiencies”.

He denied the influence of “external drivers” like the Australian Prudential Regulation Authority’s proposed capital requirements for life insurers.

Westpac says in a letter to BT policyholders that there are now only a small number of BT Life policies left in the company, which has made a separate life insurance entity “unviable”.

According to the actuarial report by David Su, BT had 1044 policies at March 3. These were term annuities with a total of $253 million of funds under management.  

As a result of these policies, BT was required to allocate $12.7 million of capital to meet APRA’s requirements.

BT Life is a profitable business, according to the report, having delivered a $7.7 million operating profit for the year ending September 30, 2010.

Its total assets at the close of the 2010 financial year were $380.9 million and after policy liabilities were deducted, net assets were $47.1 million. 

But according to the report, the profitability of the company is expected “to reduce substantially” in future years.

Westpac Life’s operating profit for the 2010 year was $93.7 million and it has total assets of $8.1 billion. Its net assets were $784.6 million.

In the KPMG independent expert’s report, there was no perceived “adverse impact” on policyholders from the transfer.

Subject to court approval, Westpac plans to complete the transfer of the business on September 30.