Friday 16th February 2018
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Suncorp New Zealand doesn't see itself as a long-term shareholder in rival Tower after its $236 million takeover was rejected by the Commerce Commission but isn't interested in a fire sale.
The local unit of ASX-listed Suncorp Group recognised a $12 million mark-to-market loss on its 19.9 percent stake in Tower in the six months ended Dec. 31. It built the holding last year paying $1.30 a share for the initial stake before settling on an offer of $1.40 per share. Its takeover approach was ultimately rejected by the Commerce Commission, which deemed the merged entity would be too tough to be contained by its smaller rivals, and Suncorp later dropped plans to appeal the decision.
Suncorp NZ chief executive Paul Smeaton said that decision was disappointing, but he won't be rushed into selling the stake, with Tower shares currently trading at 64.5 cents.
"We don't have a long-term holding view of Tower, clearly. Having said that, we'll only divest that asset when we actually see an offer that actually reflects what we believe is the true value of it," Smeaton told BusinessDesk in an interview. "We'll be very patient in that regard. We're certainly not interested in any fire sale."
The New Zealand arm of the Australian insurer boosted first-half profit 81 percent to $67 million, due largely to a reduction in the number of claims in a period where there wasn't an earthquake. The general insurance unit, which consists of Vero Insurance and the AA Insurance joint venture, lifted gross written premium 7.6 percent to $768 million, with auto and home insurance premiums growing at a double-digit pace.
Smeaton said the top-line gains were mainly due to higher premiums as the insurer passed on the cost of increased natural hazard claims and higher reinsurance costs, but also some unit growth.
"We get that we can't push all the price increases to the customers - we have to manage our costs down, manage claims better which helps reduce the impact to our customer," he said.
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