Fidelity Life has purchased most of TOWER’s life insurance business.

The announcement this morning confirms a rumour that has been circulating in the market for months.

Fidelity Life will assume management of Tower Health and Life’s in-force business and the group risk business of Tower Life New Zealand.

The aggregate value of the transaction for TOWER, including cash consideration and release of capital, is $189 million.

TOWER will sell most of its non-participating life insurance policies and retain the capital currently held against those policies. TOWER will also retain its participating book and other run-off life insurance assets which have an embedded value of $23 million. The sale implies a total value of $212 million for TOWER’s life insurance business.

Fidelity Life Chairman Ian Braddock said the deal was significant for the company, taking it from fifth place in terms of market share to third.

“Fidelity Life has always been interested in acquisition opportunities, following our previous purchases of the Lumley Life and Farmers Mutual Life businesses, and we feel the Tower Life business will be an excellent fit with our own.”

He said there were a number of conditions to the deal including regulatory approvals.

TOWER’s departing group managing director Rob Flannagan said the company would now focus on delivering high quality general insurance products and services to customers in New Zealand and the Pacific Islands.

"We determined that now was a good time to maximise value to TOWER shareholders by selling this part of the life business. This concludes our strategic review. Going forward, we will be concentrating on growing shareholder value by developing and growing our specialist general insurance business," he said.

TOWER’s half-year results presentation later this month will include details of how TOWER will apply the proceeds, including  the amount of capital to be returned to shareholders.

The deal is expected to settle in July.