AA buys into PGC insurance business
The launch of a new joint venture between Pyne Gould Corporation and the Automobile Association will allow the finance company to tap into the AA’s million-strong membership base.
The new deal, announced today, will see the two organisations join together to provide a wider range of insurance services.
AA already has its own insurance division, established in 1994 in a joint venture with GIO Australia, with Vero Insurance also signing on as a joint venture partner in 2002.
The latest venture will be launched at the start of next month and will see AA buy a 50% share of Marac Insurance, leading to a one-off capital gain of $2.2 million for Marac’s parent Pyne Gould Corp.
A five-year exclusivity agreement has been signed between the AA and Pyne Gould Corp, which includes the Perpetual group and Marac.
The venture is another step in Pyne Gould Corp’s plan to move to put more of its future earnings in its consumer book, with that book’s size increasing by $100 million over 2009, while the sizes of both its commercial book and property receivables dropped.
In 2009, the company saw a 27% increase in motor vehicle lending, with Marac capitalising on the 2008 exit of GE Capital and GMAC from the New Zealand car finance market.
Last year it entered into financial arrangements with several companies, including AA.
AA chief executive Brian Gibbons said the two organisations had learnt about each other’s businesses and the needs of AA Members over the past year.
“The opportunity to provide a broader range of services to AA members was identified. A joint business venture was the logical way to realise some of these opportunities.”
Marac Insurance already mechanical breakdown, lifestyle protection and guaranteed asset protection insurance products and these will be made available to AA members and AA authorised dealers under the venture.
There are also plans to add further products and services over time with business finance a strong goal, given 20% of AA’s members own their own small to medium enterprise.
Pyne Gould Corp chief executive Jeff Greenslade said the venture gave the Christchurch-based finance company the ability to tap into AA’s substantial distribution network and membership base.
“The AA’s members have virtually the same demographic as our target market which can best be described as ‘middle’ New Zealand. With 38 AA branches from Whangarei to Invercargill, this gives us a bank-like distribution network and fits with our strategy to become a niche bank.”
Earlier this month, Marac revealed it had been approved under the extended Crown Retail Deposit Guarantee Scheme.
Pyne Gould Corp confirmed today it was on track to meet its previously forecasted full year net profit of $20.9 million. Last month it reported a first half net profit of $10.1 million, 13% above the budgeted figure of $8.9 million,
The news has had little effect on Pyne Gould Corp’s share price (NZX:PGC), up just one cent to 48c by 2pm. The stock has been sitting between 45c and 50c since October.