Fidelity Life lifts annual profit boosted by sale of super fund
Fidelity Life Assurance, the country's third-biggest life insurer, lifted annual profit 43% as it grabbed market share and benefited from the sale of a superannuation fund it managed.
Net profit rose to $34 million in the 12 months ended June 30 from $23.8 million a year earlier, the Auckland-based company's financial statements show.
That included a $6.4 million contribution from discontinued operations, being Fidelity's former Super-Super Plan, Number 3, a retirement scheme it used to manage and which it sold to Grosvenor Financial Services in April for $11.4 million.
Earnings from the continuing life insurance operation climbed 27% to $27.6 million, or $19.19 per share, on an 11% gain in insurance premium income to $222.7 million, giving it 10.7% of in-force premium, up from 10.5% a year earlier.
The sale of the superannuation scheme "continues our transition toward focusing on life and related insurance business, and away from savings products," chairman Ian Braddock said in a statement. "As well as striving for growth in new business, we maintained our focus on keeping as many policies as possible on our books, and once again, the rate of cancellations fell."
Fidelity, which was once a takeover target for rival Tower, overhauled its business in 2013, buying Tower's life insurance business for $145 million in cash and liabilities, and selling its KiwiSaver scheme with more than $300 million under management for 64,800 members to Grosvenor, which recently rebranded as Booster Financial Services, for $16.5 million.
The insurer reaped a gain on the sale of the pension scheme's manager of $10.7 million, with the unit attracting a tax bill of $6.4 million to push it into the red for Fidelity. The scheme had 8144 members as at March 31, with $492 million under management.
In September, the board declared a final dividend of $3.48 a share, or $5 million, after the insurer's balance date. That's up from $3.31, or $4.8 million in 2015.
Fidelity's net claims expense rose 28% to $27.7 million while its bill for commissions rose 12% to $48.9 million.
Mr Braddock said Fidelity embarked on a three-year project to upgrade the firm's policy administration system, in what's "the single biggest investment made in the history of Fidelity Life," which will allow for more innovation in the products that it offers, and "futureproofs the company for many more years to come".
The insurer added $4.1 million to its internally developed software in the period, taking the total investment to $10.5 million as at June 30, of which $3.3 million has been amortised.