Life insurance consolidation will affect Aussies

9/02/2010

TOWER Insurance Australia has warned that Australians will suffer higher product margins and limited products if the life insurance industry continues to consolidate.

"In terms of increased life market consolidation, we see major consumer concern impacts around consolidation and believe the ACCC and Government should look at this closely. We do not believe this is in the best interests of Australians as consumers." said Mr Minto, Tower's Managing Director.

"The transformation of the market to fewer, larger players creates a concern that Australians will lose choice amongst life insurance providers as well as see a loss of independent companies and innovative solutions. We will potentially see Australians being offered higher margin products as a result. Life insurance is not a price and value sensitive consumer commodity product and large players with power can create reduced choice and higher prices."

"Life insurance is not well understood by the wider community but many have benefited from it in a difficult time in a person's or family's life. Life insurance can help give people dignity and choices in times of illness and bereavement."

Mr Minto said that life insurance delivered a large social benefit and that the company was proud of its purpose and the value it delivered.

"We believe the life market which has grown at over 10% per annum for 15 years will continue to grow strongly driven by the tremendous purpose and value life insurance delivers and the large underinsurance levels of Australians.

"TOWER Australia's broad distribution footprint has helped us to sustainably grow at or in excess of market rates. It is the strength of the strategy and overall positioning coupled with execution that has stood us in good stead competitively."

He said the company was very positive about the year ahead with writing sustainable business and improving the company's return on capital as some of the key priorities.

TOWER Australia Group Limited has continued to grow strongly in 2009 and this momentum has continued into 2010.

Chairman, Mr Rob Thomas, and Managing Director, Mr Jim Minto, both spoke positively about the results for the 2009 year and the outlook at the company's Annual General Meeting in Sydney today.

The company reported a 10% increase in underlying profit for the year to $74.5 million and growth in the Embedded Value of 30% to $1.2 billion.

Company Chairman, Mr Thomas, told the AGM that TOWER Australia had come through the upheavals of the GFC period in sound financial condition allowing the Board to lift its dividend by 17%.

"TOWER Australia continued to perform strongly in 2009 and maintained a strong capital position with low levels of debt. Interest cover was a healthy 12 times," he said.

"The Embedded Value of the business increased 30% reflecting improved product margins from business simplification along with strong business volume increases."

"This was an outstanding achievement in a challenging environment."

Mr Thomas said TOWER Australia had a clear focus on what it wants to be and where it wants to compete.

Mr Minto said it was the people in TOWER Australia that made the difference and he thanked them and the Board of Directors for their work and effort. He also thanked the shareholders for their support and confidence in the company.

TOWER Australia remains Australia's fourth largest life insurance company and is only independent, specialist life insurer listed on the Australian Securities Exchange. It holds leading positions in the key life insurance distribution channels of Retail through Independent Financial Advisers, Direct and Group or Workplace.