Forget about superannuation as the multi-trillion dollar growth engine of the wealth management sector. Good old life (or risk) insurance has been outpacing super growth and is expected to continue to do so.
According to a telling stat in Tower’s full-year results prezzo this morning, the life insurance sector grew 13.7 per cent between 2006-10 and is forecast to surge 11 per cent between 2011-16. The super/wealth sector grew one per cent in 2006-10 — the GFC was a formidable setback for such investment-linked products — and is expected to grow by 7 per cent over the next five years.
The life sector of course is much smaller than super and also provides default insurance to the big super funds. But why spoil a good story with inconvenient facts? Tower is the only pure-listed life insurer and CEO Jim Minto has been banging on for years about the underinsurance gap in the market. Suffice to say, not everyone has been listening.
Tower’s full-year earnings came grew to $92.3m for the year to September 30, up 24 per cent on an underlying basis, partly because of healthy new premium growth (with improved margins) and partly because claims rates — which had been ticking up — have returned to more normalised levels.
Minto says the life sector has been shaking off its legacy as a “dated, conservative” sector. “This is industry is a lot of fun,” he says. “It’s been good to try to reinvent the life market and have an influence on it.”
On a less upbeat note, Tower’s status as the third biggest life insurer (up from eighth biggest in 2003) will be upset by the upcoming union of AMP and Axa Asia Pacific.
While life insurance isn’t AMP or Axa’s key focus, the combined group will still usurp National Australia Bank/MLC as number one provider, pushing Tower into fourth place. On the group risk side, Tower is winning mandates from the industry funds with the non too subtle message: don’t give the work to the bank-owned insurers because when it comes to super they’re the enemy.
Criterion last had Tower as a buy at $2.15 on May 28, after the first-half results and a surprise rights raising which unduly buffeted the stock.
Our rating is under review. The results look very healthy and the market liked it at first blush, but often there are actuarial quirks in life numbers which take a while for the experts to winkle out.
Source : The Australian
