Tower considers troubled AMI
Listed New Zealand insurer Tower has signalled its interest in acquiring troubled rival AMI after the government announced a $500 million bailout package this morning.
''It's too early for us to comment, other than we would be interested [in a deal],'' said Tower group managing director Rob Flannagan.
''Their business is very compatible with ours, and in many ways there would be a lot of upside in my view. I have spoken to the [AMI] chief executive [John Balmforth] earlier this week, but they are choosing to go a different path at the moment.''
Christchurch-based AMI Insurance is New Zealand's second-largest residential insurer with 485,000 policyholders and 1.2 million policies across the country.
The company has more than 85,000 policyholders with 225,000 policies in Christchurch, leading to a substantial payout burden from the earthquakes in the city.
Fianance minister Bill English said today the government had agreed to provide support for AMI to ease concerns for policyholders.
''With AMI having about 35 per cent of the residential insurance market in Christchurch, a significant proportion of residential repairs and rebuilding in the city will be funded by insurance payments to AMI customers,'' he said.
AMI had approached the Government on March 9 concerned that its reserves and reinsurance might not be enough to cover all claims from the Canterbury earthquakes.
''Ministers have decided to act now,'' he said. ''This provides a financial backstop for policyholders so the rebuilding of Christchurch is not jeopardised by potential solvency or liquidity issues and so confidence is maintained in the insurance sector.''
The deal involves the government making $500 million available to recapitalise AMI in return for taking ownership of the business. The money would be called on only if AMI's resources ran out.
''AMI has confirmed it will seek an alternative commercial arrangement to replace the Government's support facility as soon as possible. The Government's actions give the company time to do that,'' said English.
Tower's Flannagan said AMI's mutual ownership structure made the options for a deal more difficult.
Asked whether Tower's war chest was enough to buy AMI, Flannagan said it was too early to say.
''It would have to be a combination of a number of things I would expect.''