Tower New Zealand has been widely tipped to be interested in buying AMI, which last week received a "last resort" support package from the Government of between $500 million and $1 billion, depending on payouts to quake-affected Christchurch policyholders.
Craigs Investment Partners broker Peter McIntyre said yesterday Tower NZ was the natural purchaser of AMI as it already operated in the same market.
However, questions remained whether Tower would want to buy AMI when it had such a big exposure to the Christchurch market. AMI accounted for about 35% of the residential insurance market in the city, he said.
Tower had already indicated it wanted to expand by bidding for the Fidelity book, although that bid was turned down.
"It's no secret Tower wants to expand its book but whether this is the right time is the $64 million question."
In Australia, Tower Australia had been bought by Dai-ichi Life in a general consolidation of the insurance market. That consolidation was likely to continue, he said.
Mr McIntyre believed there was a void of between $1 billion and $2 billion between the cash balance of AMI and its exposure to Christchurch claims.
"I believe the Government would be keen for a corporate to take AMI off its hands but that could lead to less competition in the marketplace.
"The last thing you need is when people are expecting a 20% to 30% increase in premiums to find them going up 40% because there is no competition," he said.
Prime Minister John Key said yesterday that if the Government had not stood behind AMI it would have gone into receivership.
If it went into receivership, 85,000 policyholders in Christchurch would be left in the lurch, he told TVNZ's Breakfast programme.
"The second thing is the rebuild of Christchurch wouldn't happen any time quickly. So I actually agree, we don't want to buy insurance companies but we don't want to leave 85,000 Christchurch people in the lurch, either."
Mr McIntyre expected some AMI executives and board members to resign following the issuance of preference shares to the Government.
"A major shake-up is on the cards. These things usually end with someone falling on their sword."
