Tower to grow life portfolio

Tower has paid nearly $23 million for a big stake in Sydney-based insurance direct marketer InsuranceLine as it seeks to grow its transtasman life insurance book among middle-income earners.

InsuranceLine sells a range of insurance products over the telephone on the back of television advertising.

Tower chief executive Jim Minto said yesterday: "This is part of the new world as we try to bring insurance to consumers."

He said Tower's existing network of insurance advisers in New Zealand and Australia was good at reaching higher net worth individuals, but was not so good at reaching people with more modest incomes.

"Tower sees additional distribution channels such as those provided by InsuranceLine as offering significant long-term growth opportunities."

Since Minto oversaw the turnaround of Tower's troublesome Australian operations, the company has narrowed its focus on growing its life insurance business in both countries.

Minto believes there is a big potential for Tower to grow its book in both countries where many middle-income earners are underinsured.

"We think this type of product - pure life insurance - will grow strongly," he said.

"People's houses have grown in value a lot and their mortgages have grown in value, but their insurance hasn't increased by anywhere near the same rate and we think there's a huge growth opportunity there."

Tower has about $100 million in cash on its books after spinning off its Australian Wealth Management business this year in a sharemarket float.

"This is probably them starting to look to reinvest that in businesses where they see value," said Hamilton, Hindin Greene broker James Smalley.

"They see a bit of a market niche to be exploited over in Australia. If it's an area of the market that's not been fully serviced, there is the opportunity to get in there and get some reasonable margins."

Tower has paid A$21 million ($22.96 million) for a significant holding in InsuranceLine and has also entered into a long-term distribution agreement with the company, solidifying their existing relationship.

InsuranceLine has a call centre in Sydney and has sold Tower life insurance products there since 1999.