Tower Australia does not expect the loss of the St George life insurance business to have any impact on its profit result for the 2008 year.
However, the insurance house has revealed the decision announced earlier this week would have an adverse effect on its $700 million in-force book, to the amount of $60 million – representing 8 per cent of the total.
The departure of St George’s mandate is also estimated to have a $4 million negative impact on Tower’s annualised contribution margin.
However, the insurance firm anticipates the magnitude of this loss to be mitigated by associated cost reductions over the 2008/09 financial year.
While St George’s decision to appoint a new life insurance partner was a disappointment, it did not come as a complete surprise, according to Tower.
The group admitting it does not have bank channel expertise, a quality St George was looking for in a life insurance partner.
Tower Australia has forecast the development will have a negative effect on its 2009 profit result, with the extent of the impact determined by the timeframe over which it would be transitioned out of the St George business.
When making the announcement St George forecast the transitioning out to take place over 12 months.
