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[Opinion] Will RBNZ demand proof from Resolution on support for Asteron Life customers?

Resolution Life has said it will buy Asteron Life New Zealand from Australia-based Suncorp Group and the reported price tag is NZ$410 million.

Monday, April 8th 2024, 8:29AM 1 Comment

by Jenny Ruth

But, not so fast … the purchase is subject to regulatory approvals, which means the Reserve Bank of  New Zealand, the prudential regulator of insurance companies in NZ, has to sign off on the purchase before it can be consumated.

The two companies are hoping the transaction will be completed within about nine months.

Bermuda-based Resolution Life is not a new player in the NZ market.

Resolution Life first proposed the purchase of AMP's life businesses on both sides of the Tasman in October 2018 for A$3.3 billion.

RBNZ didn't approve the sale until June 2020, by which time the purchase price had been reduced to A$3 billion.

AMP had long operated in NZ as a branch of the Australian business, but RBNZ baulked at allowing that arrangement to continue under a new and foreign owner of the  Australasian company.

Key to obtaining RBNZ's approval was Resolution Life's assurance that it would have separate, ring-fenced assets held in NZ for the benefit of the NZ policyholders.

Resolution Life's business model, as understood in Australasia, has been to buy insurance books around the world and to manage those books down in a manner to extract maximum value for Resolution Life.

Quite a few financial advisers in NZ would have a lot to say about how much Resolution has left to be desired in terms of customer service in relation to those clients in NZ still unfortunate enough to hold AMP policies.

In a key departure from Resolution Life's business model, the Bermuda-based company says that it intends to continue growing the Asteron business.

Resolution has said that it “will support Asteron Life's current strategic growth agenda in NZ” and that Asteron will provide Resolution “with significant scale and capability, materially increasing its market presence to the benefit of customers.”

“We are committed to maintaining and enhancing Asteron Life's proposition to advisers and their customers, who are such an integral part of the business,”” Resolution's Australasian chief executive Tim Tex said in announcing the purchase.

To date, the experience of advisers of clients with AMP policies has been that Resolution Life has failed to provide such service in anything like an adequate manner.

Jimmy Higgins, Suncorp's NZ chief executive, said Resolution's “dedicated life insurance focus will support Asteron Life to meet the evolving needs of customers, advisers, stakeholders and employees.”

One would hope that RBNZ with require Resolution to provide a lot more proof of the support it is capable of providing to support the NZ business than NZ financial advisers have experienced to date on behalf of AMP policyholders.

Tags: Asteron Opinion

« nib: government has no appetite for tax breaks for health ins premiumsIt'll be different this time; Asteron boss on Resolution deal »

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Comments from our readers

On 8 April 2024 at 1:04 pm JPHale said:
Good points Jenny!

The reality is service levels with Res Life have been appalling, and there are lots of reasons for that.

Part of ResLife's challenge is that it hasn't done "its thing" with a term life book in the past, and the product set and situation are quite different from those of permanent insurance businesses that have taken over elsewhere.

The other side of this is Suncorp was marking time on their ownership of Asteron Life, a similar issue to how ResLife had approached the AMP book. This hasn't been good for Asteron Life, either.

The piece here that makes this a good idea is the joining of the two. ResLife will have headwinds on its initial approach but is committed to it to extract its investment, while Asteron Life needs a well-capitalised owner who is prepared to make it work.

If ResLife wants to exit their ResLife position, doing so is much easier if they have a fully operational insurer. This makes purchasing Asteron Life, merging ResLife into Asteron Life, and then exiting by selling the fully operational company much more attractive.

Doubling down here is a reasonable bottom-line strategy with a company that looks at long-term capital investment over a period of 5-10 years isn't unreasonable to ensure their capital security.

The question, as stated, how RBNZ is going to look at this and what requirements and constraints are going to be put on them to proceed in this direction?

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