Fidelity Life profit falls 32% as gain from KiwiSaver sale washes through, hikes dividend

Net profit fell to $23.8 million in the year ended June 30.

Fidelity Life Assurance, the country's third-biggest life insurer, reported a 32 percent drop in annual profit, reflecting a year-earlier gain from the sale of its KiwiSaver business. The board raised its dividend payment as underlying earnings rose.

Net profit fell to $23.8 million in the year ended June 30, from $35.1 million a year earlier, when the insurer benefited from $16.2 million gain on the sale of its KiwiSaver scheme to Grosvenor Financial Services, according to Fidelity's annual report lodged with the Companies Office this week. Stripping out one-time items, underlying earnings rose 16 percent to $25.1 million on an 8.4 percent increase in insurance premiums to $200.6 million and a 72 percent jump in investment income to $68.8 million.

The board declared an unimputed dividend of $3.31 per share, up from $3.15 a year earlier.

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 for $16.5 million.

"After a year of consolidation and a focus on our strategic plan, we are now looking to continue on our growth path, with a focus on advisers and our policyholders," chief executive Milton Jennings said in his report. "We have some bold longer-term production and profit targets, while retaining a focus on managing expenses."

Fidelity's claims expense rose 6.9 percent to $96.4 million in the year, a ratio of 48 percent of gross premiums, which chairman Ian Braddock said was "slightly higher than the industry average."

Jennings said the insurer faces a tougher regulatory environment in the current financial year due to the Financial Markets Conduct Act coming into effect, which prompted the firm to wind up three of its legacy superannuation schemes, and with the review of the Financial Advisers Act.

Chairman Braddock said the changing regulatory landscape offered opportunities as well as challenges, and that Fidelity will look to deepen its relationships with financial advisers.

Since the June 30 balance date, Fidelity elected to extend an option to sell back 1.6 million shares it acquired in Grosvenor as part of the KiwiSaver scheme sale. The insurer could have sold the shares at $3.36 apiece, and has pushed that out for another 12 months at a price of $3.60.