Acquisition makes minnow second in health insurance

By RICHARD BRADDELL

Tower has surged into the number two position in the health insurance market through the $16 million acquisition of Axa New Zealand Health from the Axa group.

Axa Health will be merged into Tower Health in three months, giving the combined company 170,000 clients and $80 million in premium income.

Axa Health staff will be transferred to Tower.

With 75,000 customers and $24 million a year in premiums, Axa has 5 per cent of the health insurance indemnity market.

Although larger, Tower Health is a smaller player in the health insurance market, because 60 per cent of its business is in term life and other non-health risk business.

Group chief executive James Boonzaier said Tower's strength lay in major medical and hospital cover, while Axa brought more broadly based health insurance as well.

Despite its leap in size, Tower remains a minnow beside market leader Southern Cross, which took $323 million in premiums in the last financial year.

Southern Cross was cleared by the Commerce Commission last month to take over number two health insurer Aetna - which has 40,000 policies on issue - on condition that it sell Aetna's customer base.

The rationale for that acquisition was that Southern Cross wanted Aetna's computer systems and primary healthcare network, even if it could not have its customer base.

Mr Boonzaier said the Aetna customer base was of obvious interest to Tower, but the Axa business was fundamentally more attractive because of the quality of its people and computer systems.

It was likely that Tower's own health insurance business would be transferred on to the Axa platform.

The term and risk business undertaken by Tower Health would stay put.

Axa New Zealand chief executive Ross McEwan said the health business was profitable and well run but was being sold because of its small size and need for continuing investment.

He said that while Axa would no longer produce its own health insurance products, it would remain in the market by reselling Tower.

Axa is refocusing on core life insurance and funds management activities. This year it has sold NZ Permanent Trustees to the Public Trust and $300 million in home loans to WestpacTrust.