Friday 10th May 2013
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Fidelity Life Assurance has acquired most of Tower's life insurance business for a net amount of about $70 million, propelling the closely held company to the third-largest in the market.
Fidelity, whose businesses include life insurance, business insurance and KiwiSaver, is acquiring most of Tower's non-participating life insurance. The Auckland-based company has a strategy of growing organically and through acquisitions, though assets such as Tower's life business "don't come along very often," said chief executive Milton Jennings.
He declined to comment on how Fidelity is funding the deal. Tower puts a total value on the sale of $189 million including cash consideration and release of capital though Jennings says it nets down to about $70 million once liabilities are accounted for.
Tower is retaining the capital currently held against the life insurance policies and keeping its participating book and other "run-off" insurance assets which it says are worth $23 million.
The sale marks a further step in Tower's strategy to divest non-core assets after a strategic review, having sold Tower Investments to Fisher Funds for $79 million and its medical unit to Australia's nib last year for $102 million, returning capital to shareholders.
Tower will now focus on its general insurance products and services, said managing director Rob Flannagan. The latest sale concludes Tower's strategic review.
Flannagan is stepping down from his role at Tower following the completion of the listed insurer's strategic review and asset sales. He will work out the 12 months of his notice.
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