By Hannah Lynch
Nov. 22 (BusinessDesk) – AMI Insurance, the Christchurch-based firm that was forced to seek a government bailout in the wake of the earthquakes, is nearing the end of its capital raising process, amid reports a rival is interested in the assets.
AMI’s capital raising process is “coming to an end”, a well-placed industry source said. Goldman Sachs & Partners, which has been advising on the sale process, had been actively shopping the AMI opportunity to potential bidders in the last three-to-four weeks.
AMI hired Goldman Sachs to advise on raising new capital after the government provided a $500 million financial backstop that allowed the insurer to cope with surging reinsurance costs and gross quake claims of almost $2 billion.
Radio New Zealand reported that Suncorp Group, the Australian owner of the Vero and AA Insurance brands, was a front-runner in the process, though IAG and Tower, which have expressed its interest in AMI publicly, had also received presentations on AMI’s behalf.
Suncorp spokesman Jamin Smith declined to comment, while Tower managing director Rob Flannagan said the only announcement his firm planned to make this week was on its earnings.
Goldman Sachs New Zealand chief executive Andrew Barclay wouldn’t comment, AMI spokesman Mark Hamer said “no comment” and AMI chairman Kerry Nolan didn’t immediately return calls.
Industry sources said a key element of any transaction was likely to be arrangements to minimise the government’s exposure to the cost of Christchurch earthquake claims, which pitched AMI into crisis in the first place.
Among possible options would be a division of AMI’s assets and liabilities, with a buyer picking up only the assets, but giving a guarantee to take on currently insured parties when their policies came up for renewal.
In September, AMI announced it had started a programme to raise fresh capital. Finance Minister Bill English said the Treasury “has been working closely with the AMI board on securing new private capital for the company,” whose capital has been restructured from a mutual to allow a new owner.