Freedom Insurance Group (FIG) announced it will acquire a bank's insurance arm for $65 million.
FIG has entered into an agreement to purchase St Andrew's Insurance from the Bank of Queensland in a bid to diversify its insurance products.
The specialist insurance solution provider offers general, life and credit insurance through its partner Vero Insurance. Its in-force book totals $70 million; it has more than 147,000 customers and 64 employees as at 31 August 2017.
The reinsurance agreement will provide $35 million of funding, while the balance combines $10 million cash and $20 million in new debt.
FIG chief executive and managing director Keith Cohen said acquiring St Andrew's was a unique opportunity to expand manufacturing and distribution, while establishing underwriting capability and accelerating diversification into a broader range of insurance products.
"Since its launch in 2009, Freedom has seen strong organic growth and in the last 12 to 28 months; we have sought to broaden our product range to include term life and mortgage protection. We have said that given a strong balance sheet we would consider the right acquisition if it accelerated our strategy and made sense for shareholders," he said.
Part of the deal will see Bank of Queensland distribute St Andrew's Insurance products exclusively for three years with the option to extend for two years.
Cohen added this transaction represents another major step for FIG as its sees tremendous opportunity in life insurance. He expects the transaction to have a neutral effect on FIG's earnings per share in year one and positive thereafter.
"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," he said.
The transaction is expected to complete in the second half of 2018.
In September 2017, FIG sold its stake in NobleOak Life and realised about $3.3 million in profit before tax.