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BANK of Queensland (BOQ) will continue to boost its presence and capital intensity with the planned purchase of Western Australiabased St Andrew’s insurance business from the Commonwealth Bank (CBA).
BOQ managing director David Liddy (pictured) says the insurance company has 165,000 policy holders with annual gross written premiums of $75 million.
“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,” says Liddy.
“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.
“The acquisition supports the bank’s objective of improving our position relative to the majors in terms of interest to noninterest income split.”
The transaction is due for completion in July and will not include St Andrew’s investments, retirement income, financial planning and superannuation businesses.
“It will contribute to diversification of our income streams and is expected to have a positive impact on our return on equity from FY11,” says Liddy.
“This is a true bolt-on acquisition, in keeping with our existing strategy, and the capital requirements are within our existing footprint. The capital impact is less than half a year of organic growth impact.”
Commonwealth Bank group executive for wealth management Grahame Petersen, says the sale is in the best interests of both parties, as well as existing St Andrew’s employees.
“BOQ intends to operate St Andrew’s insurance as a standalone operation utilising existing systems and people.”
BOQ recently signed an exclusivity agreement to conduct due diligence for a potential purchase of CIT Group Australia and New Zealand, but the bank declined to comment at this stage.
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