Private company snaps up Tower’s remaining life insurance business
Tower has sold its remaining life insurance business for less than what it was worth as it offloads to focus on general insurance instead.
The life insurance book, valued at the end of March at $39.1 million (including a $15 million minimum solvency margin), has been sold to Foundation Life (NZ) – an Auckland-based company registered as of May 23 – for $36 million.
Limited information is available about that company, directed by Richard Gethin Davies, but Tower says it is a private company focused on the acquisition and long-term prudential management of life insurance portfolios, which are no longer being actively marketed.
According to Companies Office records, Foundation Life is owned by Melbourne-based Foundation Life Nominees.
The acquisition included a participating book, annuity business, unit linked book and a small amount of traditional non-participating term insurance. Tower Life (N.Z.) Limited had total assets of more than $700 million as at 31 March 2014.
In the year to March it had a net profit of $3.7 million, well above the full-year budget of $2.8 million due to one-off earnings improvements, Tower says in its half-yearly report.
Tower chief executive David Hancock says the sale reflects the company’s new focus as a pure-play general insurer.
Although Tower made the decision to retain its life insurance arm in January this year, Mr Hancock says it continues to receive approaches and assess these against the potential shareholder value that can be delivered.
"Foundation Life came to us with a proposition that recognised appropriate value for shareholders," he says.
There will be no changes to existing customer policies under Foundation Life.
The consideration will be satisfied with $34 million payable upon completion and a further $2 million payable two years after completion.
The sale is subject to approval by the Overseas Investment Office and the Reserve Bank of New Zealand. Settlement is likely to occur in August.