New Zealand insurance company Tower Ltd is sticking its hand up to buy AMI Insurance, which came under the protection of the Government today, even though AMI has a bigger fire and general insurance business and Tower's own major shareholder Guinness P
New Zealand insurance company Tower is sticking its hand up to buy AMI Insurance, which came under the protection of the Government today, even though AMI has a bigger fire and general insurance business and Tower's own major shareholder Guinness Peat Group wants out.
Tower's managing director Rob Flannagan has in mind a transformational transaction for both companies to create a New Zealand-owned insurance company listed on the NZX.
He is seeking to have talks with AMI after earlier contacting the troubled company to offer assistance.
The Government has unveiled a "back up financial support package" for AMI Insurance which commits an initial $500 million of funds to the company to meet any shortfall.
The package in which the Government could become the effective owner of New Zealand's second largest general insurer would only be called on as a last resort.
AMI is a mutual, which means it is owned by its policyholders, while Tower is owned by shareholders and is listed on the NZX.
Tower earlier demutualised in a process which turned policy holders into shareholders. Tower has in mind a demutualisation of AMI to facilitate a transaction.
"Demutualisation is not difficult to do if everyone is willing to do it. In our history we were a mutual," Mr Flannagan told NZPA.
He said Tower had raised $80m in a capital raising last year for the purpose of acquisitions.
"We sort of have an amount of money," he said.
He said AMI appeared to need capital. It had used up profits and reserves.
"You would argue there is not much left in terms of value," he said.
Tower could bring the appropriate amount of capital to recapitalise the business.
"By bringing the two businesses together as a listed public company in both Australia and New Zealand we can then go to the market and raise capital," he said.
AMI is about twice Tower's size in the nationwide fire and general insurance market, and has a big presence in earthquake-hit Christchurch.
Mr Flannagan said the two companies sold similar products and did not insure many commercial buildings. Tower had just upgraded its computer system and it could be scaled up to encompass AMI.
"We distribute direct mainly. They do the same but they have a lot of branches," he said.
The two businesses were a good fit and could be made into a "very relevant New Zealand company".
Sir Ron Brierley's Guinness Peat Group (GPG) owns 35 percent of Tower and GPG is being broken up after coming under pressure from shareholders.
Mr Flannagan said it was possible that GPG's exit from AMI could be "all washed up in the same thing" if a transaction could be worked out with AMI.
