Tower to pull out of China to concentrate on Australia

TheTowergroup has announced it will make a strategic exit from the life insurance market in China in order to concentrate on its Australian wealth management operations.

And the New Zealand based group confirmed today that it was prepared to merge or even divest some of its New Zealand based businesses in order to reposition itself from a broad financial services company to one focused specifically on wealth management, particularly in Australia.

The announcements came as the group reported a net profit for the six months to the end of March this year of $NZ40.7 million, up from $NZ38.9 million over the six months to the end of March 2001.

Tower managing director James Boonzaier says Tower’s exit from China, where it has already spent some $7 million pursuing a life insurance license, would save the group up to $3 million per year.

Boonzaier says Tower’s ambitions in Australia would continue to include the acquisition of other wealth management groups.

However Boonzaier did not comment on growing market speculation that Tower was looking to acquire the Royal Sun Alliance group.

“Acquisitions have been part of our core strategy and that will continue on into the future,” Boonzaier says.

Tower will also look to leverage further off its existing network of independent financial advisers and its distribution alliance with 120 credit unions to channel what will be a revamped range of wealth management products to the Australian market.

The group is already testing a new customer referral structure through some of its credit union partners with the aim of boosting leads for advisers of Tower’s third party dealer group, Bridges. Tower is also helping the credit unions themselves to recruit and train financial planners.

The group’s renewed push into the Australian wealth management market will also be underpinned by the development of a new flagship master trust.

Tower has combined its existing master trust and wrap account operations into a new business unit, the Investment Administration Centre, which will take control of the development of the new platform.

According to Boonzaier, the strategic revamp of Tower would add $NZ400 million to the value of the company by 2004 and help boost its flagging share price.

He says Tower’s decision to leave China was based on the country’s imminent entry into the World Trade Organisation, which would fuel competition amongst multi-national insurance and investment companies and reduce the chances of Tower reaching its profit targets.