Australian life re/insurer Freedom Insurance Group has entered into an agreement with Bank of Queensland (BOQ) to purchase St Andrew’s Insurance for a total consideration of AUD $65 million (USD $50.58 million), over half of which will be supplied via reinsurance funding.
The parties revealed that the transaction is comprised of a $35 million quota reinsurance arrangement between the life insurer subsidiary of St Andrew’s and an undisclosed major global reinsurer, while the remaining costs will be funded through $10 million in cash and $20 million in new debt.
Additionally, Freedom and BOQ will enter an exclusive three-year distribution agreement with the option of a two-year extension, which will see Freedom provide life insurance products to BOQ’s customers.
Freedom believes the acquisition of St Andrew’s will allow it to expand its manufacturing and distribution while developing its underwriting capability and diversifying its product range.
Last year, St Andrew’s recorded an in-force book of $70 million, with over 147,000 customers and 64 employees.
Keith Cohen, Chief Executive Officer (CEO) and Managing Director of Freedom, said: “St Andrew’s meets our acquisition criteria as it brings significant new capability and management resources; accelerates our product diversification in loan protection and term life; and makes financial sense for shareholders. It would take years for us to replicate the St Andrew’s infrastructure.
“We are acquiring valuable new platforms that will augment our strategy, including specialised life insurance underwriting and a well-established corporate distribution platform. These will provide greater flexibility and agility in product manufacturing and an additional distribution channel that together will allow us to capture more of the life insurance value chain.”
Jon Sutton, CEO and Managing Director of BOQ, agreed that the transaction made strategic sense for both parties, commenting: “St Andrew’s has made a strong contribution to the BOQ Group since its acquisition in 2010, but industry and business dynamics have changed dramatically in recent years. These changing conditions now mean St Andrew’s is a better long-term strategic fit for Freedom.”
The transaction is expected to be completed in the second half of 2018, subject to finalisation of the reinsurance arrangement, regulatory approvals and other conditions precedent.
