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30/01/2006
TOWER Limited today announced it has agreed to acquire PrefSure Holdings
and Life Limited (“PrefSure”) from Liberty of South Africa, for $A145million
cash. Mr Jim Minto, TOWER Limited Group Managing Director, said the purchase
will clearly establish
TOWER as a market leader in the Australian Life industry and put the merged entity into the top 5 of Australian Life Insurance companies.”
“The purchase is in -line with the group’s strategy to grow both organically and through strategic acquisition where unique value can be added,” he said. PrefSure is a specialist Life Insurance business with annual in -force premiums of over A$270 million and with a particular strength in providing Life insurance to Master Trusts. Combined funds under management for these Master Trust customers are in excess of A$60 billion. The company also has a significant individual life insurance business primarily distributed through independent financial advisers. PrefSure employs approximately 160 staff and brings with it a highly experienced management team.
Mr Minto said that in the case of PrefSure it 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. “This purchase emphasises TOWER’s commitment to the fast growing and profitable Australian
Life Insurance Industry.” The merged entity will be very well strategically positioned with an inforce market share of 11.2% in Life Insurance and annual premium income in excess of $A540 million. The merged entity will have the second highest new business market share at 15.8%.
The acquisition will be funded through a mix of cash and debt facilities. The acquisition price represents a multiple of 1.1 times PrefSure’s estimated 2006 embedded value. Following the acquisition and as a result of IFRS adjustments TOWER’s gearing level will be 36% (net debt / debt plus equity), reducing to approximately 30% by September 2007. The acquisition funding will not itself affect the capital adequacy ratios of TOWER Australia Limited or PrefSure. The transaction is expected to be accretive to Basic Earnings per Share in 2007 and beyond.
Australian's Underinsured:
Australian families need to consider all of their insurance needs together and
to continually review their policies to ensure they are not under insured in any
area. Recent research shows that only four percent of Australian families with
dependent children have an adequate level of life insurance cover. (Rice Walker
Actuaries and TNS Australia, May 2005)
And a staggering 60 percent of insured families have not got enough life insurance to look after their dependants for 12 months if they were to die. (Rice Walker)
Many households are also under insured for general insurance, with 20 percent of homes only insured for between 70 and 90 percent of replacement value.
People often put life insurance, in the unaffordable category, especially as they are struggling to even insure themselves against losing their home, valuables or having a car accident.
Of course many people think it isn't going to happen to me', yet people are realistic enough to understand that they could lose their home or car, but don't seem to be able to make the jump to protecting their finances in case of death or illness.
