Tower lifts half year profit 32% on discount rate, general insurance

Friday 29th May 2009

Tower, the insurer and investment manager part-owned by Guinness Peat Group, lifted half-year profit by 32% on better earnings from its general insurance arm and an accounting gain on the valuation of life risk policy liabilities.

The shares jumped 5%. Net income rose to $26.6 million in the six months ended March 31, from $19.9 million a year earlier, the company said in a statement. That included a $5.1 million gain from the impact of movements in the cash rate. Underlying profit rose 5% to $21.5 million. Tower stock climbed 8 cents to $1.65.

“Tower continues to operate successfully in a highly competitive and very uncertain market,” said managing director Rob Flannagan. The first-half results were “very healthy” in the face of the “seismic shifts in financial markets globally.”

The global credit crunch and economic downturn has forced companies to raise capital to pay-off debt and improve their balance sheets as they stave off the impact of dwindling consumer demand and evaporating confidence.

Tower raised $81.7 million in March with a sale of unsecured five-year senior bonds at a fixed rate of 8.5% and expects to repay $86.3 million of bank debt next month.

Companies have lined up to sell bonds to investors amid sinking deposit rates. New Zealand Post Group Finance, Fonterra Cooperative Group, and Vector have all tapped the fixed-interest market this year.

Revenue for the company’s health and life operation sank 4.7% to $73.4 million, while general insurance sales rose 6.3% to $104 million. The company won’t pay an interim dividend.

Businesswire.co.nz

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