Fidelity to pocket $16m from KiwiSaver sale

Fidelity agreed to sell its KiwiSaver scheme to Grosvenor Financial Services in July, for $16.5 million in cash and shares.

Fidelity Life Assurance, which bought Tower's life insurance business for $145 million in cash and liabilities this year, will book about a $16 million gain from the sale of its KiwiSaver assets, according to its latest annual report showing a 26 per cent lift in profit.

The Auckland-based insurer agreed to sell its KiwiSaver scheme with more than $300 million under management for 64,800 members to Grosvenor Financial Services in July, for $16.5 million in cash and shares, the company said in its annual report.

The transaction costs are expected to be about $400,000, leaving a one-off gain of $16.1 million.

Fidelity has potential for extra share payments if the KiwiSaver scheme attracts at least 2,000 members in each of the next two years, and can convert the Grosvenor shares to cash two years after completion.

The life insurer lifted net profit to $17.1 million in the 12 months ended June 30, from $13.5 million a year earlier. Total insurance revenue jumped 52 percent to $110.6 million, led by turnaround in the fair value of its unit trust investments. Premium income rose 9.5 percent to $104.1 million.

Chairman Ian Braddock said the company's major focus for the 2014 year is to integrate the Tower unit which "presents a huge opportunity to cement a position as a leading insurance provider in the New Zealand market."

The board declared a base dividend of $2.42 per share, and a special dividend of 58 cents, taking the total return to $3. Fidelity's directors revised their dividend policy to maintain real increases in the rate year on year, targeting a 10 percent per annum compound increase over a five-year rolling period.