Youi NZ’s insurance portfolio acquisition by Tower Insurance is expected to be closed by the end of this year
Tower Insurance has agreed to acquire the insurance portfolio of Youi NZ for NZ$13m (£6.6m), subject to regulatory approvals.
Under the terms of the agreement, Tower Insurance will acquire Youi NZ’s nearly 34,000 in-force policies, with an option to offer Tower policy renewals as current Youi NZ policies expire.
Subject to regulatory approval from the Reserve Bank of New Zealand (RBNZ), the agreement is expected to be closed before this year end.
Tower stated that if the deal is approved, Youi customers will remain covered under their existing terms for the remainder of their contract.
Youi customers will receive benefits of Tower’s plain English policies
The customers will then receive the benefits of Tower Insurance’s plain English policies, commitment to trust-both-ways and its risk-based approach to pricing.
Tower Insurance CEO Richard Harding said: “The purchase of Youi’s portfolio will assist us to accelerate our growth and we are now firmly positioned as a challenger brand focused on delivering good customer outcomes and value for our shareholders.
“Together with the successful implementation of the IT simplification programme currently underway, this investment will deliver growth, build scale and leverage the investment in IT.”
Tower Insurance claims to have consulted with RBNZ to understand the likely capital requirements to support the deal.
The discussions also included Tower’s existing solvency capital, with particular focus on the company’s EQC receivable, which currently forms part of Tower Insurance’s solvency capital.
The company intends to pursue the collection of the EQC receivable to the maximum extent possible.
Harding said: “We continue to be confident in the recovery of this receivable and while we have entered an alternative dispute resolution process, we are firmly committed to collection of the EQC receivable to the maximum extent possible.”
To facilitate change in licence condition and the acquisition of Youi NZ portfolio, the company aims to raise NZ$47.2m (£24m) in capital via a pro-rata renounceable entitlement offer.
The Kiwi insurer also stated with the likelihood of litigation and associated delay in receiving funds, it could be appropriate to exclude the EQC receivable from its solvency calculations.
Accordingly, RBNZ has modified Tower Insurance’s licence conditions to remove the receivable from its solvency calculations with effect from 31 of this October.