Why would Rand Merchant be selling their NZ operations? Could be poor asset quality with limited margins.
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Why would Rand Merchant be selling their NZ operations? Could be poor asset quality with limited margins.
According to their statements they lost market share $26M 2018 to $24.5M in 2019 (premium).
The capital raise has virtually nothing to do with the acquisition. The EQC receivable is now in question and is assumed to be subject to litigation. The capital raise is to shore up solvency
Ratio.
Correct - that's the really interesting thing here. The RBNZ has obviously grown a pair and said "we won't approve the Youi deal unless you change how you look at the EQC disputed receivable asset from a capital perspective." Clever and probably very frustrating for the Tower Board. This could be taken one of two ways for shareholders; the likelihood for collection of the asset is perceived to have reduced (possible but not likely), and/but, the future collection of this asset from the EQC in whatever form (whether its 1% or 100%+ of the original assumption) will result in a substantial profit and dividend for shareholders to enjoy down the track if and when it materialises.
Read again re: balance sheet and the purpose of the capital raise re: EQC receivable.
You're probably not wrong re: Youi's market share. I'd say they compete most closely with the TradeMe Insurance brand (administered by Tower) for the low-cost offering in the market, be interesting to see what product Tower move the Youi policyholders on to at renewal assuming the deal goes through.
I guess on the upside, if (when?) the ACC receivable is received it won't be needed for regulatory capital requirements. It could therefore be distributed back to shareholders, potentially through a share buyback aka what Fletcher are doing now following their earlier capital raise. Alternatively strong organic growth won't need additional capital for quite a while.