Most of the $7 million in synergies arising out of Tower’s $145 million purchase of insurance group Prefsure would be found in the “non-people” areas, according to Jim Minto, Tower chief.

Minto said while there would be some job losses in the management teams the projected savings following the merger of the two groups would come from shared infrastructure and technology. “The businesses are complementary – Prefsure’s strength is in the group master trust areas and Tower is stronger in the individual market,” he said. While the master trust business would certainly be a “top-line” growth area for Tower/Prefsure, Minto said it would also continue to expand in the higher margin individual life market. The deal highlights Tower’s strategic return to its original stomping ground of life insurance but Minto said it is also trying to “revitalise” its dormant funds management business. Tower currently manages about $3 billion in funds, mostly in its fund-of-funds vehicle but it also owns the master trust/wrap business Beacon. Under pressure from major shareholder, the Ron Brierley directed Guinness Peat Group, Tower last year untangled itself from its wealth management business when it spun off the dealer group Bridges and several other business units into the listed entity AWM Tower paid a slight premium for Prefsure in the deal announced yesterday, which was valued at $133 million by its owner, the South African group Liberty. Just two years ago Prefsure bought the Australian insurance firm Lumley Life for $85 million only to be swallowed up itself by Liberty last year. Liberty announced its intention to sell Prefsure last November. Minto said there were several bidders for the Prefsure business and Tower was not considered to be “an inside runner”. However, he said Tower’s “clean” cash offer probably clinched the deal with rivals offering a work-out agreement. “It wasn’t a transaction decided solely on price,” Minto said. Axa, AMP, Commonwealth Bank and MLC/NAB were understood to be in the bidding for Prefsure. Following the completion of the purchase, which is expected to receive regulatory approval in March, Tower will enter the top five insurers in Australia and have the “second highest new business market share”, Minto said in a statement. “The merged entity will be very well strategically positioned with an in-force market share of 11.2 per cent in life insurance and annual premium income in excess of $A540 million,” he said. Tower paid a mixture of debt and cash for Prefsure and the deal will push its debt level out from 29 per cent to 36 per cent. However, the group said the big splash on Prefsure would not necessarily rule out a dividend for Tower this year.

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