BOQ Signs Agreement to Purchase St Andrew’s Insurance

Friday, 26/03/2010

Through the purchase, BOQ will acquire the consumer credit insurance and life insurance products which St Andrew’s distributes through a base of financial institutions and other providers.    

The purchase is subject to regulatory and government approvals. 

As part of the deal, Bankwest (part of the CBA Group) will maintain its existing relationship with St Andrew’s through an exclusive long-term distribution agreement. 

BOQ Managing Director David Liddy said: “The acquisition of the St Andrew’s business fits within the BOQ growth strategy, including income diversification through businesses with complementary products to our core mortgage distribution. 

“BOQ is already a significant customer of St Andrew’s and has a deep understanding of its business model.” 

St Andrew's Insurance business 

“The majority of St Andrew’s premiums are in credit protection products, addressing a significant customer need that has been growing in light of the GFC and which is aligned to BOQ’s housing and SME target segments,” said Mr Liddy. 

St Andrew’s principally operates a Business to Business (B2B) model for distribution of credit protection products, with the potential to expand the distribution of the standard term life product to a direct distribution model, including on-line facilities. 

“We intend to operate the business as a stand-alone entity and BOQ will maintain the St Andrew’s Insurance Perth-based headquarters as well as its existing presence around the country,” said Mr Liddy. 

“We believe the benefits of moving St Andrew’s Insurance across to BOQ ownership are significant not just for BOQ, but for the Australian banking industry, insurance industry, the staff of St Andrew’s Insurance, and Australian consumers in general. 

“The acquisition supports the Bank’s objective of improving our position relative to the majors in terms of interest to non-interest income split.  

“BOQ has previously communicated to the market our focus on improving the capital intensity of our model and this acquisition moves us further towards that goal. 

“It will contribute to diversification of our income streams and is expected to have a positive impact on our return on equity from FY11. 

“This is a true bolt-on acquisition, in keeping with our strategy, and the capital requirements are within our existing footprint.  The capital impact is less than half a year of organic growth impact.” 

"St Andrew's has annual Gross Written Premium of $75m and approximately 165,0001 policyholders.” 

The purchase is expected to be immediately earnings per share (EPS) accretive, based on current trading performance, but there will be no material impact on EPS in FY10. 

The transaction is expected to complete around July 2010 after the sale conditions - which include regulatory and government approvals, completion of a transfer under Part 9 of the Life Insurance Act of some policy portfolios which are not being acquired and other commercial conditions - are satisfied. 

BOQ looks forward to working with existing management to grow the St Andrew’s business.