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Sovereign Mk III in the making

Former Sovereign creator Chris Coon and Naomi Ballantyne, who left Sovereign to establish Club Life, are looking to repeat their start up life insurance company trick again.

Tuesday, December 7th 2010, 5:00AM 18 Comments

They, along with Richard Coon, have established the Partners Group and are currently looking to raise money for the new company.

They say a unique set of market circumstances led to the creation of Sovereign and Club Life (which was bought by ING and is now called OnePath Life) and there is again a "strong opportunity" for a start up life company.

Among the opportunities listed are: under insurance; a changing regulatory environment which will make it harder for new players to enter the market; and a raft of issues relating to changes in the market.

Included in this last category is the current market consolidation. OnePath Life is predicted to become more inward focussed now it is wholly owned by ANZ and there is an expectation the bank will seek to reduce costs such as commissions.

The proposed AMP/AXA merger will see also see "a significant period of inward focus" and remove one of the bigger competitors for a start-up.

Sovereign gets singled out for its move to a more aligned distribution force, while Tower's failed hostile bid for Fidelity and AIA's ownership question are raised as positives for a start up.

Partners claims to have the "strongest product development capability" in New Zealand and says this will be a key competitive advantage.

Also it will rely on its relationships with independent financial advisers and broker dealer groups to distribute its products.

It says it already has strategic alliance relationships with a number of key distribution companies including the largest broker dealer network.

While its initial products will be life insurance it is looking to add home loans and domestic fire and general insurance later.

It plans to offer a "competitive" remuneration model and is considering offering a share option scheme to advisers. This is something Club Life did too.

It will also look to develop a direct distribution model.

Currently Partners is looking to finalise a deal with a reinsurance partner and seeking additional capital to facilitate the acquisition and development of people, systems, products and marketing expertise.`

It forecasts that new business premiums in year five will be around $27 million (8% of market share) and annual gross premium revenue will be $70 million.

The company also says that it will look to do an IPO in five years time, assuming market conditions are favourable.

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Comments from our readers

On 7 December 2010 at 9:22 am Mike said:
On 7 December 2010 at 10:59 am T said:
why "Yay!"?
On 7 December 2010 at 11:02 am Brian Klee said:
Very interesting timing and really of little surprise to those who have been around the life industry awhile.
On 7 December 2010 at 11:25 am Geoff Peterson said:
Good People do good deeds.

Great People do Great deeds.

We need Great People in our industry, with the ability to
create opportunities, show Leadership, and be passionate in their endeavours.

This is a real positive for the industry looking forward.

Well done.
On 7 December 2010 at 11:31 am David Chakravarty said:
Good news! I am sure they will pull it off.
On 7 December 2010 at 11:56 am T said:
Nice words. They don't answer the "why Yay!" question though.

If this is Sovereign Mk III as the headline suggests, I can't see the "Yay" yet.

Sovereign Mk I arrived as distribution was unshackled, and it was competing against mutual life companies that had just disbanded their own agency forces. Sure it innovated, and changed the game - but the game was changing all around it at that point anyway, and it was relatively easy to innovate in that climate and at that time in NZ. A bit later, when it was not so easy, Sovereign Mk I became a banking arm. These days it looks a lot like it is becoming a tied agency distribution structure within a bank.

No "Yay!" in that for the adviser side of the industry that I can see.

Sovereign Mk II promised to be focussed on the independent adviser - and only "high quality" ones at that. It innovated a little, and was a welcome market participant at a time when the industry was settling into its new equilibrium. All good so far.

But it struggled to get big market share or widespread strong support from the independent advisers, and a bit of product innovation didn't appear to be enough to change that. So it started the commission-escalation-game to secure sufficient distribution support...which is only just starting to abate it seems.

Then it got bought by a fund manager, and ultimately a bank.

Is this looking like the beginning of a pattern?

So why is the third version going to be fantastic for the industry? I don't see anything to go "Yay!" about in their December 2010 Information memorandum.

What am I missing?

On 7 December 2010 at 1:37 pm Sirca, said:
YAY YAY. About time I think the market ready for it. Another Naomi success in the making. Send me the applications, I'm in. some these other insurance corps have lost the plot big time
On 7 December 2010 at 2:56 pm Name supplied said:
I'm with T on this one, no cause for celebration at all, just more of the same bulldust from the same people. What we need in the new highly regulated age is less not more. No one can sensibly use more than three companies on a regular basis so we need less, but better quality well financed players. We do not need yet another candidate for bank takeover.
On 7 December 2010 at 5:07 pm Krusher said:
Interesting comments by a few re Sovereign Mark I and II.

Maybe some misleading headlines!!

Both companies have been successful in gaining market share in thier own right Both being ultimately being purchased by banks and having to dance to thier masters wishes.

Sovereign appears to be hell bent on getting out of the independant broker market with thier SovNet contracts and quotas at least ASB/CBA kept the original name.

OnePath / ING Life / Clublife have done some great stuff in the market place with product and service. Changes are happening under the new regime, commission and bonuses being cut, service standards slipping.

Axa & Amp combining, tower chasing Fidelity, choice is dissapearing fast.

It is time for a new and fresh player in the market.

Go you good things !!!!!!!
On 7 December 2010 at 11:48 pm Brian James said:
As someone who had early experience of Sovereign I - good for everyone but their customers. I cant share the desire to celebrate
On 9 December 2010 at 2:43 pm Daryl said:
Chris & Ian were a breath of fresh air to the life industry in 1989, and I'm sure that they will bring innovative products and service levels back into the industry once again.
On 9 December 2010 at 5:05 pm Ted said:
I struggle with the concept of Naomi being involved.
She has spent the last 12 months telling everyone she can find that they should be dealing with her advisers at Advice and not with Independant Brokers. Now shes saying she wants to deal with Brokers and Dealer Groups.
Shes also on record as saying never again with a Life Insurance Company.
I would be concerned with this thinking going forward.
On 11 December 2010 at 3:02 pm Willis said:
Chicken little meets “The Perfect Storm”

If you were the owner of a Bar that was supported by a brewery, you don’t go about selling the opposition’s product. You heavily advertise and talk up your key brewery and bar. So what’s the difference between that and Naomi promoting her business, Us Advice, as the one that she rates as the best? Would McDonalds positively promote Burger King? It seems to me to perfectly sound business sense to promote your business at every opportunity, when, and where-ever you can, or have I misunderstood the basics of how to grow your brand and business. I apologize if the above sounds little condescending - but then maybe not?

Enter chicken little – the sky is falling in, we don’t need another insurer, he said, she said……

Enter stage right – “The Perfect Storm”. Start with the global financial crisis, add in the failure of finance companies, put in a pinch of regulations including anti-money laundering, Adviser Regulations, new Securities laws, and for good measure, Prudential Regulation.

Crystal ball-gaze and consider the following on who could be around to write for in say 5 years time:

1. Tower/Fidelity merger?
2. AXA/AMP merger?
3. OnePath
4. Sovereign
5. KiwiBank
6. BNZ
7. Westpac

Of the 7 main players above, 5 are owned by banks and 6 are effectively tied distribution. What is left for so called dealer groups and independents?

Good time to understand Prudential Regulation then it may start to make sense why so few choices above, and the timing of a new company.

Most of us have changed our minds on something in our lives, and I guess Naomi is no different. Given that current events are the biggest shake up in 20 years for the industry here is an opportunity to set up a new company when the timing would not be better. Having worked for Naomi in the past I would jump at a chance to be involved in setting up a new company given the passion she has for the industry, the unselfish giving of her time and energy into developing her staff and the opportunities that present themselves.

Sorry of this sounds like a pitch for Partners Life, but the fact is I suspect that there are a lot of people in the industry that maybe don’t see or understand the bigger picture and what the landscape may well lok like in the not to distant future.

On 12 December 2010 at 2:40 pm independent girl said:
Where would the industry have been without the last two start-ups Sovereign and Club Life? Where would independent advisers be without Sovereign championing their cause and creating the catalyst for many unhappy tied advisers to become business owners who now have a choice about whether they support a new start-up or not. Where would the industry be without the fantastic product innovation and fierce competition that Club Life brought to the table which has led to NZ having some of the most comprehensive coverages available to customers?
If my memory serves me right Chris ran Sovereign for approximatly 15 years Naomi was there for 12 and then ran Club Life/ING Life for a further 10 years. Between them they have truly shaped our industry for over a quarter of a century. These are not fly by nighters looking for a quick buck - these are people who are passionate about the industry and about long term sustainable businesses. Much better for the industry I think than many senior executives who have never taken a personal risk or made an industry challenging or changing decision. It doesn't take talent to simply bag the opposition.
As for Naomi having built an independent advisory practice over the past 12 months - isn't this good for the industry as well? A brand new independent advice company which will provde additional exit strategies for a number of existing advisers as well as ensuring the independent advice industry will continue to grow into the future. As long as she has separated herself from that business now that she is embarking on building this new one I can't see any problem.
I can only wait with bated breath to see what excitement these guys are going to generate over the next few months.

On 12 December 2010 at 2:48 pm Eunice said:
I can only assume the comments about not wanting another competitor in the markets as advisers can only handle three products anyway are some kind of joke? Even it you think limiting yourself to three product providers is good business practice - why wouldn't you want the best three? If this new company gives the industry a better product then wouldn't you simply drop the weakest product in your portfolio and replace it with the better one? Then you still have your three!
On 27 December 2010 at 5:50 pm Drew said:
I say well done, and perfect timing. It will be good to have people leading with passion and doing the right thing by the peeople of New Zealand. Giving people the financial support at time of illness and hardship. NOT just in it for a quick $$$$. These leaders will do the right thing for everyone, advisers, policy holders, and those whom work for them. I wish you all the very best and I know Partners Group will be another huge success within our industry
On 13 January 2011 at 4:57 am Jos Bassett-Smith said:
Re 7th December - Just to clarify -
the "yay" comment didn't come from Mike Bassett-Smith. (Even although Mike is always positive towards Naomi).
On 6 February 2011 at 2:44 pm Consumer Eyes said:
Very astute. Set up US Advice infrastructure, set up a new insurer and look for new capital, sell the infrastructure to the new insurer, and then IPO - its all just money making and the policyholder will pay ultimately. Some people seem unable to join the dots. The mention of IPO is a simple word in bad economic times for a plan to sell off the intangible insurance asset and pocket the gains.
Commenting is closed



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