Daily ShareChat: Tower

By Jenny Ruth

Monday 22nd June 2009

Tower's general insurance business was a stand-out performer in the six months ended March, according to Morningstar.

The general insurance business' net profit grew 22%, driven by strong growth in premiums and cost control.

"Underwriting growth was even stronger at 37% but this was offset by lower investment returns due adverse market conditions," Morningstar says.

"We think management has executed well so far in getting the business back on track. The firm sees scope for further price increases going forward which should be positive from a profitability perspective."

Tower's individual life business also did very well and gained market share, it says. Good cost control, particularly in funds management, was another highlight and further savings are expected in the second half.

"However, the health business witnessed a slowdown because of recessionary conditions as it is considered a discretionary product," Morningstar says.

Overall, Tower's net profit rose 32% to $26.6 million for the six months with underlying profit, excluding $5.1 million in one-off gains in the life business, grew 5%. Return on equity rose to 17.7% from 15.4% while gearing fell to 3.9% from 9%.

Morningstar is forecasting a $42 million net profit for the full year followed by a $45 million net profit next year.

BROKER CALL: Morningstar rate Tower Limited (NZX: TWR ) as accumulate (downgraded from buy).

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