Zurich Insurance Group has agreed to acquire ANZ’s life insurance businesses in Australia for A$2.85bn ($2.14bn).

The acquisition of OnePath Life strengthens Zurich’s strategy of focusing on capital-light protection and unit-linked business. It expands bancassurance capabilities and reduces volatility.

OnePath has a range of wealth and insurance products available through financial advisers or direct to customers.

The deal, which will increase return on equity, cash remittance targets and shareholder returns for Zurich, includes long-term distribution arrangements with Australian bank ANZ.

The 20-year distribution agreement with ANZ will see Zurich distribute life insurance products via bank channels.

Zurich will have access to 6 million customers of ANZ who are served through the bank’s more than 680 branches and over 2,300 ATMs, as well as digital distribution channels.

The deal will allow Zurich to have about 19% share of the Australian retail life insurance market. The company will also have around 6% of the group life market.

It complements existing independent financial adviser of Zurich and bank distribution channels in Australia.

Zurich expects to fund the agreement from internal resources and senior debt. It expects to initially pay A$ 1bn of upfront reinsurance commissions, subject to regulatory approval in May 2018, with the rest of the amount paid upon completion.

Zurich CEO for Asia Pacific Jack Howell said: “Zurich has earmarked the Asia Pacific region to be a major engine of growth in distribution and service capabilities, building on our recent acquisitions of Macquarie’s retail life insurance business and the Cover-More Group.

“Importantly, we are acquiring a profitable business with loyal customers and a track record of strong, stable cash flows.”

ANZ Group Executive Wealth Australia Alexis George said: “Partnering with Zurich is the best outcome for ANZ customers given it will become Australia’s leading life insurer with the scale to invest in product and digital innovation.”

Image: Zurich CEO for Asia Pacific Jack Howell. Photo: courtesy of Zurich.