ANZ completes simplification of Wealth Australia

Australia and New Zealand Banking Group Limited ABN 11 005 357 522

News Release
For release: 12 December 2017

ANZ completes simplification of Wealth Australia
- agrees to sell Life Insurance business to Zurich Insurance
Group; 20-year strategic alliance with leading life insurer-

ANZ today announced it has completed the simplification of its Wealth Australia division with
the sale of its life insurance business to Zurich Financial Services Australia. The sale is
comprised of two transactions with total proceeds of $2.85 billion, inclusive of $1 billion of
upfront reinsurance commission from Zurich.

This follows the sale of its OnePath pensions and investments (OnePath P&I) and aligned
dealer groups (ADG) business to IOOF Holdings Limited (IOOF) in October for $975 million.
Total proceeds from the simplification of Wealth Australia is $3.83 billion.

Following completion, Zurich will be Australia’s largest retail life insurer as measured by in-
force premiums with more than 1.5 million customers, while IOOF will have a top-five
superannuation platform with the second largest aligned financial advice network.

Life Insurance Transaction Scope
1
:
 100% of One Path Life Australia Holdings Pty Limited (OPL)
 As at 30 September 2017, total life in-force premiums were $1.7bn
2

 Transaction does not include New Zealand and ANZ will retain Lenders Mortgage
Insurance, General Insurance distribution and Financial Planning

Life Insurance Transaction Summary:
 Total proceeds of $2.85 billion include $1 billion of upfront reinsurance commission from
Zurich to ANZ and $1.85 billion for 100% of the life business
 Annual profit of business is $189 million on a 2017 pro forma cash NPAT basis
 Equates to a 2017 Price/Embedded Value of 1.0x
3
, 15.1x 2017 Price/Earnings on a pro
forma cash NPAT basis
 Carrying value of $3.38 billion. Estimated accounting loss on sale of ~$520 million post
separation and transaction costs of ~$75 million post-tax and release of available for sale
reserve
 Expected to increase ANZ’s consolidated CET1 capital ratio by a total of ~$2.5 billion or
~65 basis points
4
(~25 basis points upon completion of the reinsurance arrangement and
a further ~40 basis points on completion)
 The transaction would be broadly EPS and ROE neutral if capital released is returned to
shareholders

Combined Transaction Summary:
 Total proceeds of $3.83 billion for combined sales
 Equates to 16.8x Price/Earnings on a pro forma cash NPAT basis
 Combined sales to increase ANZ’s consolidated CET1 capital ratio by ~80 basis points


1 A support pack for this announcement has been lodged separately with the ASX
2 Also includes 100% of OnePath General Insurance – OPGI has in-force premiums of $69m and currently only underwrites the
general insurance component of credit insurance policies
3 Excluding franking credits
4 Based on 30 September 2017 Group consolidated total Risk Weighted Assets

Capital released following reinsurance and completion of the life insurance sale is expected
to increase ANZ’s consolidated CET1 capital ratio by ~65 basis points and largely be surplus
to ANZ’s unquestionably strong requirements.

The sale is another step in ANZ’s strategy to create a simpler, better balanced bank
focussed on retail and business banking in Australia and New Zealand, and Institutional
Banking supporting client trade and capital flows across the region.

As part of the agreement, ANZ and Zurich will enter into a 20–year strategic alliance to offer
life insurance solutions through ANZ’s distribution channels.

With a long history in Australia and a presence in more than 210 countries and territories,
Zurich is a highly regarded insurance company with global capability in providing life
insurance solutions to more than 60 million customers in partnership with 70 banks in 17
countries, including Santander, Citibank, HSBC, and ING.

ANZ Group Executive Wealth Australia Alexis George said: “From the outset we’ve been
focussed on partnering with a high-quality organisation culturally aligned to ANZ and we’re
pleased we will be able to provide our customers with access to wealth products from one of
the world’s leading and most respected global insurers.”

“Zurich’s experience in working with banks around the world to provide insurance solutions,
combined with its commitment to innovation and strong presence in Australia is a good
outcome for our customers, shareholders and distribution partners.

“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.

“This transaction will complete the simplification of ANZ’s Australian wealth business,
however we will continue to work hard to minimise any disruption to our customers during
the transition,” said Ms George said.

There are no changes to any current insurance policies as a result of today’s announcement,
including general insurance products provided via QBE.

ANZ expects completion to occur in late 2018 together with the recently announced sale to
IOOF of the Group’s Pensions & Investments and Aligned Dealer Group businesses. The
transaction, including the reinsurance, remains subject to regulatory approval.

A video interview with Chief Executive Shayne Elliott discussing this transaction
will be available at bluenotes.anz.com at 7:30am (AEDT).

A support pack for this announcement has been lodged separately with the ASX
and is available on shareholder.anz.com

For media enquiries contact:

Stephen Ries, +61 409 655 551

For investor enquiries contact:

Jill Campbell, +61 412 047 448
Cameron Davis, +61 421 613 819

---

UPDATE ON WEALTH AUSTRALIA DIVESTMENTS
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
12 D ECEMB ER 2017

2
O V E R V I E W
1.Also includes 100% of OnePath General Insurance – OPGI has in-force premiums of $69m and currently only underwrites the general insurance component of credit insurance policies
2.Refer page 5 for further details of the reinsurance arrangement
3.Pro forma basis: Pensions and Investments includes DAC amortisation but is pre ANZ consolidation adjustments and amortisation of acquisition related intangibles, Life insurance and general insurance is pre ANZ consolidation
adjustments and amortisation of acquisition related intangibles
4.Based on 30 September 2017 Group consolidated total Risk Weighted Assets
5.The final gain/loss on sale will be determined at completion and will be impacted by transaction and separation costs, final determination of goodwill to be disposed, other balances (including AFS reserve) and final taxation impacts


•ANZ today announced the sale of its Wealth Australia life insurance business to Zurich Financial
Services Australia (Zurich).
•The sale of Wealth Australia’s life insurance business comprises a sale of 100% of One Path Life
Australia Holdings Pty Limited and a reinsurance arrangement (“OPL”)
1
. The total proceeds under
the two transactions is $2.85 billion, including a $1 billion upfront reinsurance commission
2
.
•As part of the sale agreement, ANZ will enter into a 20 year strategic alliance with Zurich to offer
life insurance solutions through ANZ’s distribution channels.
•This follows the 17 October 2017 announced sale of ANZ’s OnePath Pensions and Investments
and Aligned Dealer Groups businesses (“OnePath P&I”) to IOOF Holdings Limited for $975
million.
•Combined outcome (OPL and OnePath P&I):
•Total proceeds $3.83 billion
•2017 Price/Earnings multiple on a pro forma cash NPAT
3
basis of 16.8x
•Expected to increase ANZ’s consolidated CET1 capital position by ~80 basis points
4
•Estimated accounting loss on sale of ~$640 million
5

•ANZ expects completion of transactions to occur in late calendar year 2018. The transactions,
including the reinsurance, remain subject to regulatory approval.

A N N O U N C E D S A L E O F L I F E I N S U R A N C E B U S I N E S S
TRANSACTION SUMMARY
3
1.The final gain/loss on sale will be determined at completion and will be impacted by transaction and separation costs, final determination of goodwill to be disposed, other balances (including AFS reserve) and final taxation impacts.
2.As at 30 September 2017
3.Based on 30 September 2017 Group consolidated total Risk Weighted Assets
Transaction
Sale of Wealth Australia Life Insurance business to Zurich Financial Services Australia
Transaction metrics
•Total proceeds of $2.85 billion across two transactions:
-$1 billion of upfront reinsurance commission from Zurich (expected to occur in May 2018)
-$1.85 billion for 100% of OPL
•2017 P/EV multiple excluding franking credits of 1.0x (0.9x including franking credits).
•2017 P/E multiple on a pro forma cash NPAT basis of 15.1x
•Estimated accounting loss on sale of ~$520 million
1
includes:
-separation and transaction costs of ~$75 million post-tax
-release of Available For Sale reserve
-carrying value ~$3.38b (~$2.45 billion NTA, ~$810 million goodwill, ~$120 million VIF & DAC intangibles)
2
•Embedded value of OPL at 30 September 2017 $3.31 billion (including franking credits).
•Expected to increase ANZ’s consolidated CET1 capital ratio by a total of ~65bp
3
(~25bp upon
completion of the reinsurance arrangement and a further ~40bp on completion).
•EPS and RoE impacts broadly neutral if capital released is returned to shareholders

A N N O U N C E D S A L E O F L I F E I N S U R A N C E B U S I N E S S
STRATEGIC ALLIANCE & CUSTOMER OUTCOME
4

Strategic alliance
•As part of the sale agreement, ANZ will enter into a 20 year strategic alliance to offer life insurance
solutions through ANZ’s distribution channels.
•ANZ’s Australia Division distribution income for Life Insurance products is expected to be broadly
similar to distribution income received from OPL.
•The strategic alliance will commence upon completion of the sale of OPL.
Customer outcome
•A good outcome for customers and shareholders:
-Zurich has a long history in Australia and a presence in more than 210 countries and territories with global
capability in providing life insurance solutions
-Zurich is experienced in working with banks around the world to provide insurance solutions to more than 60
million customers in 17 countries through over 70 bank agreements including Santander, Citibank, HSBC and
ING
•There are no changes to any current insurance policies as a result of today’s announcement,
including general insurance products provided via QBE.
•ANZ will retain the Lenders Mortgage Insurance, ANZFP and ANZ Share Investing businesses
within the Australia Division post completion.

Overview
•To gain early exposure to a portion of OPL earnings, Zurich will enter into a quota share reinsurance
agreement via a $1 billion upfront commission payment
•In effect, Zurich acquires the rights to a portion of the profits from OPL’s in-force insurance book
•Arrangement is expected to be in place in May 2018, subject to regulatory approval
1
Structure Profit & Loss impacts for ANZ
Upfront reinsurance commission


Portion of in-force insurance book


Ongoing reinsurance recoveries

Upfront reinsurance payment of $1 billion
•No profit & loss impact
•Arrangement has a balance sheet impact, wherein ANZ
replaces an asset (Deferred Acquisition Costs) with cash.
•In turn ANZ recognises a capital benefit to CET1 of ~25bp
PRE Reinsurance Treaty
•ANZ’s coverage remains unchanged and full profits will
be earned up to the date of the Reinsurance Treaty.
POST Reinsurance Treaty
•ANZ forgoes a portion of the profits of OPLs in-force
book (estimated ~$22 million post tax in FY18, ~$54
million on an annualised basis).
•Substantial portion of portfolio will be reinsured
however cost of administering portfolio is fully covered.
REINSURANCE ARRANGEMENT
5
1.In the event of the reinsurance arrangement not proceeding, sale of OPL would proceed as a single transaction with total proceeds of $2.85 billion. Transaction would remain subject to
regulatory approval


A N N O U N C E D S A L E O F L I F E I N S U R A N C E B U S I N E S S
ANZ Zurich
Zurich makes upfront commission payment
to ANZ for reinsurance agreement
ANZ
Zurich
ANZ
Zurich
ANZ receives reinsurance recoveries from
Zurich on business reinsured
Zurich receives a portion of premiums from
the OPL in-force book

W E A LT H A U S T R A L I A D I V E S T M E N T S - 2017
1.The final gain/loss on sale will be determined at completion and will be impacted by transaction and separation costs, final determination of goodwill to be disposed, other balances and final taxation impacts
2.Pro forma basis: Pensions and Investments includes DAC amortisation but is pre ANZ consolidation adjustments and amortisation of acquisition related intangibles, Life insurance and general insurance is pre ANZ
consolidation adjustments and amortisation of acquisition related intangibles
3.Includes Life Insurance, and OnePath General insurance in-force premiums of $69m
4.FTE as at 30 June 2017. ADG aligned advisors are sourced from ASIC (as at 3 October 2017)
6
Transactions OPL (Announced today) OnePath P&I (Announced 17 October 2017)
Products Insurance products include:
•Advised Life (OneCare and closed products)
•Direct Life (upgraded suite and closed products)
•Group Insurance
•Mastertrust Insurance
•Consumer Credit Insurance (Credit Card Insurance, Loan
Protection Insurance and Mortgage Protection Insurance)
•Small legacy run-off portfolio of pension and investment
products
P&I Platforms & Products include:
•Advised (Retail) including OneAnswer Mastertrust
•Advised (Wrap) including ANZ Grow wrap & Oasis badged wrap
•Employer Super (ANZ Smart Choice Employer)
•Direct Products (ANZ Smart Choice Retail)
•Other closed superannuation products issued by OnePath P&I.
ADGs & ADG Brands: Millennium3, RI Advice, Elders Financial
Planning, Financial Services Partners.
Total proceeds $2,850m $975m
PE Multiple 15.1x 2017 pro forma Cash NPAT ~25x FY17 NPAT (~17x after separation & transaction costs)
Price/EV 1.0x excluding franking credits (0.9x including franking credits)
Gain/Loss (est.) Accounting loss on sale of ~$520m
1
Accounting loss on sale of ~$120m
1
,
Separation &
transaction costs
~$75m post tax ~$300m post tax
APRA CET1 Expected to increase ANZ’s CET1 by ~65bp Expected to increase ANZ’s CET1 by ~15bp
ROE & EPS Impacts are not material to ANZ Impacts are not material to ANZ
ANZ FY17
Financial
contribution
Pro forma Cash NPAT $189m
2
Insurance in-force book ~$1.7b
3
Pro forma Cash NPAT $39m
2
OnePath P&I business FUM $48b
ADG FUA $19.5b
FTE
4
ANZ: ~900 ANZ: ~1,200 & ADG: 717 aligned advisors
Combined
position
•Total proceeds of $3,825m for combined sales
•Equates to 16.8x PE multiple on a pro forma cash NPAT basis

•Combined sales to increase ANZ’s consolidated CET1 capital ratio by ~80 basis points

1.OnePath P&I and OPL
2.Pro forma basis OnePath P&I includes DAC amortisation but is pre ANZ consolidation adjustments and amortisation of acquisition related intangibles, OPL is pre ANZ consolidation
adjustments and amortisation of acquisition related intangibles
3.On 8 March 2017 ANZ announced an agreement with CMC Markets to provide a market leading share trading solution to customers under the ANZ Share Investing brand
FINANCIAL CONSIDERATIONS
7
W E A LT H A U S T R A L I A D I V E S T M E N T S - 2017
$m
FY17
(Wealth Aus. Total)
FY17
(Divested businesses
1
)

FY17
(Retained businesses)

Operating income 1,086 694 392
Operating expenses (743) (482) (261)
Profit before income tax 343 212 131
Cash profit after tax 238 143 95
Group adjustments 85
Cash profit pro forma
2
228
FY17 Cash Profit
FY18 considerations
Divested businesses
1
•Completion expected in FY19. Impact on FY18
financials is expected to be limited to:
-Foregone profit on a portion of the in-force
insurance book upon commencement of
the reinsurance agreement (refer slide 8)
-Some separation costs to be incurred in
FY18 (refer slide 8)
Retained businesses

•ANZ to retain Lenders Mortgage Insurance,
ANZFP, General Insurance distribution & ANZ
Share Investing
3
•Australia Division currently generates income
from the distribution of Life Insurance products
and will continue to earn distribution income

Mostly internal funding costs &
amortisation of acquisition related
intangibles, to cease upon
completion of divestment

I M PA C T O F A L L A N N O U N C E D D I V E S T M E N T S
ANZ 2018 FINANCIAL IMPACT
8
$m Asia Retail SRCB MCC UDC
OnePath
P&I
OPL
6
FY18
Total
(lower
earnings)
Revenue ~-570 -58 -39 ~-80 ~-32 ~-779
Expenses – Direct

~-185 ~-25 ~-210
Expenses – Indirect ~-85 ~-85
Provisions ~-85 ~-5 ~-90
Cash Profit
(pre gain / loss on sale)
~-175 -58 -39 ~-40 ~-22 ~-334
Gain / (Loss) on sale ~60 Nominal ~245 ~100 ~-190
3
~215
4
CET1 impact ~6+ bp ~40bp ~9bp ~10bp - ~25
5
~90+ bp
Basis for lower earnings
3 divestments in
2H17, 3 in 1H18:
Revenue -~85%,
Direct exp. -~85%
Indirect exp. -~30%
Provisions -~70%

Cessation of
equity
accounting
earnings
Cessation of
equity
accounting
earnings
~9 months
earnings impact
Cessation of
insurance income
under
reinsurance
arrangement
INDICATIVE CHANGE IN CONTRIBUTION FROM DIVESTMENTS (FY18 vs FY17)
1
OnePath P&I
•Completion est. FY19
•Loss on sale ~$120m
2
•CET1 impact ~15bp
All divestments are indicative and subject to regulatory approvals
1.Indicative only based on anticipated timing and FY17 earnings as a basis for FY18. FY17 not necessarily representative of future earnings
2.Total estimated accounting loss on sale at completion
3.Portion of separation costs expected to be incurred in FY18. Refer to OnePath P&I and OPL call out boxes for total estimated accounting loss on sale
4.Includes MCC ~245m, UDC ~100m, Asia Retail ~60m, OnePath P&I and OPL separation costs of ~$(190)m
5.~25bp upon commencement of the reinsurance arrangement, further ~40bp upon completion of sale
6.Indicative change is based on estimated FY18 earnings after allowing for the impact of the reinsurance arrangement
OPL
•Completion est. FY19
•Loss on sale ~$520m
2
•CET1 impact ~65bp
5

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Equity Investors
Jill Campbell
Group General Manager Investor Relations
+61 3 8654 7749
+61 412 047 448
jill.campbell@anz.com
Cameron Davis
Executive Manager Investor Relations
+61 3 8654 7716
+61 421 613 819
cameron.davis@anz.com
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Senior Manager Investor Relations
+61 3 8655 3261
+61 435 965 899
katherine.hird@anz.com
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Michelle Weerakoon
Manager Shareholder Services & Events
+61 3 8654 7682
+61 411 143 090
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