13 May 2013

Fidelity to buy Tower life insurance business

7:26 am on 13 May 2013

Fidelity Life is to approximately double in size by buying most of Tower Limited's life insurance operations for an effective $189 million.

The purchase represents a twist in fortunes for the firms. In 2010, Tower launched an unsuccessful take-over bid for Fidelity which valued the latter at $118 million.

Fidelity is an unlisted public company with more than 100 shareholders and more than $140 million in shareholders' equity.

It put its hand up to buy Guinness Peat Group's 34% stake in Tower more than two years ago after GPG announced plans to sell most of its assets.

Fidelity Life chairman Ian Braddock says his company is keeping confidential how it plans to fund the purchase for now, but says the company is ensuring that it will still have a very strong balance sheet after the transaction.

Mr Braddock says there are a number of conditions to the deal, including Reserve Bank and other regulatory approval, and he expects everything to be finalised within the next few months.

He says the purchase will take Fidelity Life from about fifth place in terms of market share to third place.

Fidelity chief executive Milton Jennings said last week the effective cost to his company will be about $72 million.

Fidelity has a history of growing by acquisition. It bought the Lumley Life book in 2004 and Farmers Mutual Life in 2007.