Dorchester Pacific, which avoided failure last year by convincing investors to accept a debt-for-equity swap, will exit the life insurance business and concentrate on writing non-life policies after a review its savings and insurance operations.
The company plans to run out its existing term life business and has closed its Dorchester SuperLife savings product with life cover to new policyholders, it said in a statement. Dorchester will seek an insurance licence under the new Insurance (Prudential Supervision) Act - which is overseen by the Reserve Bank - to focus on non-life products, it said.
“As was indicated at the recent Annual General Meeting, Dorchester Life’s insurance business has become complex for its overall scale and the new regulatory environment will add considerable costs to the operation in its present form,” chief executive Paul Byrnes said.
Improved returns from insurance will be achieved with “a greater focus on consumer insurance products aligned to Dorchester’s lending business,” he said. Costs of the changes “are not very significant” and will be taken in the year ending March 31, 2012, he said.
“The new consumer insurance product sales together with lower overheads and operating costs in the division going forward are expected to produce a higher profit for the insurance division next year.”
That would help Dorchester Pacific to achieve its target of a “better than break-even trading result”, he said.