1 Dec 2012

Aust buyer gets clearance on Tower medical fund

3:22 pm on 1 December 2012

Newcastle-based health insurer nib is branching out across the Tasman, completing an $A80 million acquisition of a New Zealand fund.

It has completed its acquisition of Tower Medical Insurance, the ABC reports.

The Newcastle Industrial Benefits Medical Fund - which trades as "nib" - says it is excited about its prospects in New Zealand, after receiving all of the necessary regulatory approvals for the acquisition.

Tower Medical Insurance has a market share of 13%, but Tower Group decided to sell after saying it was too small to get a decent return.

The managing director at nib, Mark Fitzgibbon, is confident it can do better.

He says he'll aggressively advertise to consumers directly, target market leader Southern Cross's employee group business and renegotiate broker contracts.

On this side of the Tasman, Southern Cross's share of the health market is more than 60 percent.

Mr Fitzgibbon says its skew toward older customers and thin margins makes it vulnerable.

Tower's other businesses

Separately, insurer and fund manager Tower Group says the pace of hikes in premiums in its other insurance businesses hould begin to slow over the coming year, due to re-insurance costs begin to stabilise after recent natural disasters.

The company made $55.8 million for the year to September, a rise of 67% compared with last year's $33.4 million, with more people taking out general, life and health insurance.

The result included a further $13.6 million in costs associated with the Canterbury earthquakes, but Tower's managing director, Rob Flannagan says its general insurance arm has started to recover from the quakes, while its experienced better growth in life insurance.

Mr Flannagan says premium hikes in its general insurance policies helped offset the rising reinsurance costs.

And he says the cost of insurance for customers should begin to level off.

The company is paying a final dividend of 6 cents per share.

Shares in Tower closed down 2 7 cents at $1.93 each on Friday.