CGU opts out of premium funding
Pacific Premium Funding has solidified its status among Australia’s top-tier premium lenders by adding CGU’s premium funding business to its burgeoning portfolio.
The company, started by industry veteran Grant Burley in 2001, says it has well in excess of $1 billion on its books. It is probably Australia’s largest finance lender to clients purchasing premiums through insurance intermediaries.
With the premium funding market valued at $3.5 billion, Pacific Premium Funding now controls an estimated one-third of the sector.
MD Grant Burley says the deal makes sense for both companies but comes at a time when insurance industry profit margins are shrinking.
“I think the market is really tough at the moment, and people have to decide whether they want to be in it,” he said.
“CGU is really in the business of insurance, and our core operation is finance.”
Pacific Premium Funding has expanded rapidly since it began six years ago, and the CGU purchase comes hard on the heels of a $200 million account purchase from Austbrokers.
“If we aren’t in the No 1 position we are very close to it,” Mr Burley said.
The deal includes the existing loan book of CGU Premium Funding, forward business and the transfer of several staff.
CGU CEO Mario Pirone says the sale of the premium funding business follows a strategic review.
“While CGU Premium Funding is a profitable and well-performing business, we do not believe it is sustainable in the longer term in its current form.”
Mr Burley says Pacific Premium Funding is toiling through a soft rates cycle. Expanding the size and scale of the business is important as a wider field of competitors, particularly banks, set up shop in the sector.
“I think the market is going to get a lot tougher. The intermediaries are demanding more from premium funders.
“The premium funding segment is also facing competition from banks, so it’s now a matter of competition between the broader financial markets.”
GE Commercial Finance has a majority stake in Pacific Premium Funding. Mr Burley says a “timetable” has been set for GE to eventually assume full ownership. Meanwhile, Pacific Premium Funding is keeping an eye out for acquisitions.
The company, started by industry veteran Grant Burley in 2001, says it has well in excess of $1 billion on its books. It is probably Australia’s largest finance lender to clients purchasing premiums through insurance intermediaries.
With the premium funding market valued at $3.5 billion, Pacific Premium Funding now controls an estimated one-third of the sector.
MD Grant Burley says the deal makes sense for both companies but comes at a time when insurance industry profit margins are shrinking.
“I think the market is really tough at the moment, and people have to decide whether they want to be in it,” he said.
“CGU is really in the business of insurance, and our core operation is finance.”
Pacific Premium Funding has expanded rapidly since it began six years ago, and the CGU purchase comes hard on the heels of a $200 million account purchase from Austbrokers.
“If we aren’t in the No 1 position we are very close to it,” Mr Burley said.
The deal includes the existing loan book of CGU Premium Funding, forward business and the transfer of several staff.
CGU CEO Mario Pirone says the sale of the premium funding business follows a strategic review.
“While CGU Premium Funding is a profitable and well-performing business, we do not believe it is sustainable in the longer term in its current form.”
Mr Burley says Pacific Premium Funding is toiling through a soft rates cycle. Expanding the size and scale of the business is important as a wider field of competitors, particularly banks, set up shop in the sector.
“I think the market is going to get a lot tougher. The intermediaries are demanding more from premium funders.
“The premium funding segment is also facing competition from banks, so it’s now a matter of competition between the broader financial markets.”
GE Commercial Finance has a majority stake in Pacific Premium Funding. Mr Burley says a “timetable” has been set for GE to eventually assume full ownership. Meanwhile, Pacific Premium Funding is keeping an eye out for acquisitions.