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Nice 5th birthday present for Partners Life

Partners Life has just been given a cheque for its fifth birthday and it's a pretty big one  - $200 million.

Tuesday, May 31st 2016, 8:56AM 3 Comments

by Philip Macalister

Naomi Ballantyne

When any of my kids turned five they probably got a cheque from their grandparents for $50 bucks to spend as they wanted. Partners Life has just turned five and it is getting a cheque for $200 million. Sure this will be paid out over the next couple of years, but it will be well spent growing the business.

The money has come from one of the biggest investors in the world, New York-based Blackstone. The company recently hit headlines in New Zealand with the purchase of five well-established retirement villages. it also owns Burger King and Ixom, a former division of Orica.

The investment into Partners is a coup for the company, as many people had doubts that it could find the necessary capital to grow, especially after market turmoil put back plans for a listing on the sharemarket.

The capital injection will, I suspect, be the envy of some competitors. Life company executives often talk about the need for capital and the difficulty they have raising it. To see this young upstart get $200 million will be a worry for some.

One of the popular avenues has been the use of reinsurance finance, however since the Reserve Bank became the prudential regulator of the sector it has frowned on. 

It was interesting to see in the recent NZIER report o life insurance (commissioned by Sovereign) this comment: "We understand the Reserve Bank of New Zealand has instructed the (Partners Life) to reduce its reliance on reinsurance to fund business growth."

Partners managing director Naomi Ballantyne says: "That line is completely untrue.  We have never been instructed to do anything by the RBNZ – we are just expected to comply with regulations the same as every other company, which we do."

It may also surprise some that none of the existing shareholders are selling down their holdings following Blackstone's investment. As Ballantyne said she'd rather be putting more money as Blackstone will be wanting to grow the value of the business before it eventually exists at some point in the future.

No doubt Partners competitors will paint the sale as a sell-out to foreign investors. However, that line holds little credit as there is only one 100% New Zealand-owned life company.

What will be particularly interesting to see is how AM Best deals with the company's rating. Normally ratings changes are a move one notch, up or down. Partners is hoping to do something a little different and see its rating go up two notches. One for the additional capital backing of Blackstone and the other because it has just celebrated five years in business. This milestone seems to be an important one for the agencies.

With money coming in the door expect to see Partners Life move into new areas. The company has had its eye on the mortgage market for sometime as well as areas like fire and general. The wouldn't be bad areas to spend your birthday cheque on.

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

Tags: Partners Life

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Comments from our readers

On 2 June 2016 at 12:19 pm Majella said:
What a deafening silence to this news....
On 3 June 2016 at 8:19 am BayBroker said:
Great news for Partners Life and also the wider life insurance market in NZ.

Having strong innovative companies doing business can only be a good thing for the market.
On 3 June 2016 at 10:35 am Tash said:
Congratulations to Partners Life, what a massive endorsement of them and their business.
On the flip side, shame on NZIER for making unfounded statements not properly checked and confirmed, there are many in our industry who continue to spread lies and speculation as if they were truths. It's about time they showed some integrity, we will never be a profession while this type of nonsense is spread about. Isn't there a law against spreading unsubstantiated comment like this?

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