Independent financial advisers will remain key distribution channels for specialist life insurers PrefSure Holdings and Life Limited under its new owner Tower Australia.
Tower announced today it had agreed to acquire PrefSure from South African insurance giant Liberty Group, for $145 million, to be funded from existing cash reserves and bank debt.
The purchase, which will put the merged entity into the top five of Australian life insurance companies, is scheduled to come into effect on March 1, subject to the approval of the Australian Prudential Regulation Authority (APRA) and the Foreign Investment Review Board (FIRB).
Tower spokesperson Rod Metcalfe said PrefSure had “significant individual life insurance business through independent financial advisers, and it could be assumed this will continue to be a focus within a broad-based distribution network”.
He said another “particular strength” of PrefSure is in providing life insurance to master trusts, with in-forced premiums of $270 million and combined master trust funds under management of $60 billion.
PrefSure was first put up for sale in November by Liberty — which acquired the risk insurer last year through its acquisition of fellow South African insurance giant Capital Alliance Holdings.
“The purchase is in line with the group’s strategy to grow both organically and through strategic acquisition where unique value can be added,” according to Tower managing director Jim Minto.
Minto said PrefSure, which employs approximately 160 staff, was “unique in the way it complements Tower’s existing business.
“Tower has a strong position in individual life insurance business lines, whereas PrefSure’s strength is in the key master trust sector,” he said.
The merged entity will be strategically well positioned, with an in-force market share of 11.2 per cent in life insurance and annual premium income in excess of $540 million, Minto said.
The merged entity will have the second highest new business market share at 15.8 per cent.
The acquisition price represents a multiple of 1.1 times PrefSure’s estimated 2006 embedded value of $133 million.
Following the acquisition, Tower’s gearing will be 36 per cent reducing to approximately 30 per cent by September 2007.
The transaction is expected to be earnings accretive in 2007 and beyond.
