It's Not Often.......

......that these pages see comment on particular organisations, unless, like Ross Asset Management, they stimulate broad response and require closer scrutiny.stamp However, the news that the investment arm of Tower has been sold off, brings forward some relevant and interesting issues about this organisation.

Originally trading as Government Life for many years, this life insurance company was the backbone of the community's financial protection, so the evolution to this current stage of development - with only a risk book of business, the new business levels for which have been flat-lining for years now, tells a pretty sorry tale.

Going back to the days when Hutton Peacock, then CEO, attempted unsuccessfully to close down an embryonic Sovereign operation, Tower stood like a great colossus in the industry. Sure, the old civil service culture was hard to fathom in the rapidly changing life insurance industry dominated by private enterprise, but the reach of Government Life and the re-branding to Tower - along with the appointment of James Boonzaier - seemed to herald a new era for this august organisation.

I sat beside James at an industry Conference in Auckland on the day of his appointment as CEO was confirmed, and there is no doubting that the man was excited, pleased, and honoured to be appointed to the role.  I cannot record with any authority or accuracy how he felt on his departure some years later, but I strongly suspect that there was some unfinished business on James' agenda. Be that as it may, Tower took some massive strides forward during his stewardship, despite the dead-hand of the residual 'civil servant' culture hanging around the organisation.

Fast forward to the modern era, and we saw Tower mounting a so-called bid for Fidelity.

This was risible, senseless, and futile.

Informed industry commentators took a close look at Tower and wondered why the attempt was mounted. The approach was doomed to fail, and, as anticipated, other predatory eyes turned to look at the circumstances surrounding the listed organisation with default Kiwisaver status, a reasonable Funds Under Management portfolio, and Fire & General brand of very well-known dimensions in the market place.

After a hazy recollection of 4 years at University, the Laird started his insurance career at Eagle Star Group in Glasgow. ESG was a composite office - writing Fire & General, Life, Superannuation, Annuities, and Investments. These lines of business were all divisions under the one umbrella organisation and the one outstanding common feature which dominated the internal landscape was the burning desire to get away from each other! While diversification had been the name of the game in the UK in the post-war environment, the 1970's saw the rise of specialist life and superannuation offices which were dominating the new business statistics, unencumbered by the pressures of Fire & General Management considerations.

So the announcement in 2012 that Tower was to 'merge' the three divisions at operational level sent a shiver down the Laird's spine.

What on earth possessed Tower management and Board to adopt this structure will, I hope, remain a mystery. Reverting back to an arcane structure such as this, forcing executive management to wait in a corporate queue now three times longer than before for product development, systems development, and possibly even regulatory compliance simply beggars belief.

I'm sure it seemed like a good idea at the time, but even a rudimentary glance at experience elsewhere would have revealed similarly structured corporate cadavers from the US to Europe to Asia and back again.

So what's left is a life insurance risk portfolio, bereft of the medical insurance product (which at least could be relied upon for increased cash flow on an annual basis), with no Kiwisaver database for future outbound marketing potential, and little, if any underlying growth.

Tower appears to be caught in no-man's land - unpopular with the Dealer Groups, and bereft of any real momentum to challenge the like of Partners, Asteron, (where a number of ex-Tower execs have re-surfaced) or any other middle-tier life company fighting for space in the market.

The competition may be picking over the bones - who knows for certain - but I seriously doubt if there's any real tasty morsels left worth fighting over.


The Laird