TOWER announces the sale of most of its life insurance business to Fidelity Life Assurance Company Limited. Click here to see the announcements to the NZX and ASX.
Additionally, TOWER will shortly be writing to TOWER Life policyholders whose policies will be transferring to Fidelity with more information about the sale. Policyholders can expect to receive a letter within the next week. To read the letter sent to group schemes click here.
Q&As
Q. Who is buying the Life business?
Fidelity Life Assurance Company Limited
Q. Who is Fidelity Life?
Fidelity Life is an unlisted New Zealand owned life insurer specialising in life insurance, personal protection, business insurance, savings, investment and KiwiSaver.
Q. When does the new management take over?
Settlement is expected to be in July 2013.
Q. What are the details of the sale?
We have sold most of our life insurance business to Fidelity Life Assurance Company Limited (Fidelity Life). The aggregate value of the transaction for TOWER, including cash consideration and release of capital, is $189 million. Under the agreement with Fidelity, TOWER will sell most of its non-participating life insurance policies and retain the capital currently held against those policies, releasing an aggregate amount of capital of $189 million. In addition, TOWER will also retain its participating book and other run-off life insurance assets which have an embedded value of $23 million. The sale implies a total value of $212 million for TOWER’s life insurance business.
Q. What is their financial credit rating?
The same as TOWER's. A- (AM Best rating)./ See here: http://www.fidelitylife.co.nz/homepage/AboutUs/FinancialStrengthRating.aspx
Q. Is this the end of the strategic review?
Yes
Q. Will TOWER need to seek shareholder approval for the sale of Life?
No.
Q. Will TOWER need to seek approval from policyholders for the sale of Life?
We will be writing to them to advise them of the intention to sell the business, and to seek their feedback.
Q. What is TOWER's business strategy?
TOWER will focus on delivering high quality general insurance products and services to customers in New Zealand and the Pacific Islands.
Q. Will TOWER sell the general insurance business as well?
There are no plans to sell the General Business.TOWER has a lot of cash on call.
Q. What's it planning to do with this money?
The majority of this cash is held on behalf of policyholders and held to ensure that we can meet their insurance policy claims when required. The Board regularly assesses the capital needs of the business and will continue to do so.
Q. Has the Life business been sold because the Board still thinks the shareprice is undervalued?
The Board has determined that selling the Life business will provide value for TOWER shareholders because it enables TOWER to narrow its focus. The narrower focus means the market will be better able to understand TOWER enabling the company's value to be reflected in the share price.
Q. Are there many regulatory requirements we have to met before settlement date?
Reserve Bank of New Zealand approval will be required.
Q. What will TOWER do with the proceeds of the sale of TOWER Life?
The half year results presentation on 28 May will include details of how TOWER will apply the proceeds of the transaction, including the amount of capital to be returned to shareholders. At that time, TOWER will also provide pro-forma financial information to reflect the sale of its life insurance business; information relating to the ongoing capital structure and earnings and dividend guidance for the ongoing specialist general insurance business and remaining assets.
Q. What is TOWER doing with the proceeds of the Investment sale, for $79m to Fisher Funds?
The half year results presentation on 28 May will include details of how TOWER will apply the proceeds of the transaction, including the amount of capital to be returned to shareholders. At that time, TOWER will also provide pro-forma financial information to reflect the sale of its life insurance business; information relating to the ongoing capital structure and earnings and dividend guidance for the ongoing specialist general insurance business and remaining assets.
Q. Is there another return of capital planned for shareholders (additional to the $120m capital repayment made in April)
The half year results presentation on 28 May will include details of how TOWER will apply the proceeds of the transaction, including the amount of capital to be returned to shareholders. At that time, TOWER will also provide pro-forma financial information to reflect the sale of its life insurance business; information relating to the ongoing capital structure and earnings and dividend guidance for the ongoing specialist general insurance business and remaining assets.