Insurer Tower 'not waiting for a takeover'

RICHARD MEADOWS
Last updated 16:05 06/02/2014

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Tower's chief executive has rejected suggestions the insurer is sitting around waiting to be taken over, with a major brand refresh on the way.

The small insurer has single digit market share in New Zealand, and has sold off three out of four of its business arms in the last financial year.

At yesterday's annual meeting in Auckland, chief executive David Hancock told BusinessDay there was still a strong platform for growth.

He said there were opportunities in growing vehicle insurance market share, as well as strategic drives in small business insurance and the rural sector.

"It's quite clear we're not waiting for a takeover," Hancock said. "Clearly we need to do more of a job in talking to people about where the opportunities are."

He said Tower was in the process of developing a "brand refresh", which would highlight its pedigree as a 144-year-old New Zealand-owned business in a market dominated by foreign competitors.

The company was creating a new marketing campaign "and we'll be launching something soon that hopefully touches the hearts and minds".

Earlier in the meeting, Tower chairman Michael Stiassny took a swipe at Australian rival IAG's proposed acquisition of Lumley.

"We . . . hope the Commerce Commission will take a very close look," he said.

"We believe there is significant risk in one business controlling two-thirds of the personal insurance market in New Zealand, especially if New Zealand was to suffer another event such as the scale of Canterbury [earthquakes]."

IAG sells most of its products through the State, AMI and NZI brands, and claims it will still face significant competition following the merger.

Hancock said industry consolidation was a key long-term theme, and Tower was prepared to participate where it added value for shareholders.

"As a public company, you've always got to look at other alternatives," he told BusinessDay.

Tower directors faced robust questioning from shareholders, including Milford Asset Management executive director Brian Gaynor.

Having compared prices on a range of insurance products online, Gaynor questioned what Tower had to offer the market.

"I just looked at a few things, like a Ford Territory - the annual premium for AMI is $535, for Tower is $873, above 40 per cent more," he said.

"Every single thing I went through, I found out that Tower pricing was much higher than its competitors in New Zealand."

But Hancock said Tower's prices were competitive, particularly when several products were bundled together.

"Clearly there are a lot of customers out there who are happy to pay the price for the services and policies we provide."

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Gaynor also criticised Tower for failing to reduce the pool of funding for directors' fees, even while the board had shrunk from seven to five with the retirement of Mike Jefferies and Michael Allan.

"The size of the company has shrunk in half, the number of board members is going down, but the directors' fees are staying the same," he said.

Stiassny said as long as he was chairman, directors would not be dipping into the funding pool.

"You don't have to have any worries about anything happening that is untoward."

He said he would make it a requirement that any future increase would have to come back to the annual meeting to get shareholder approval.

Stiassny also said the company would keep looking for ways to return excess capital to shareholders, after last month's successful share buyback.

"We're just keeping abreast of it and reviewing it continually."

- BusinessDay

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