Tower September year net profit rises 79%

By NZPA

Thursday 24th November 2005

Insurer and fund manager Tower Ltd said today its September year net profit rose 79% to $97.8 million.

The company said the profit was boosted by an asset sale and strong returns from investment markets.

Operating earnings excluding revaluations, goodwill, amortisation and excluding its spun-off Australian Wealth Management (AWM), business were $42.7m, at the top end of the $40-43m guidance made on November 1.

Tower is the third-largest retail fund manager in New Zealand and second-largest health insurer, but a small player in Australia.

Analysts, on average, had forecast a net profit after tax of $53.9m and earnings before interest and tax of $49.3m.

The company has recovered from losses in 2003 as it booked writedowns on its Australian operations, and weak markets dented investment returns.

It did not declare a dividend. In February, it spun off and listed its Australian financial planning and funds management unit, Australian Wealth Management, as part of its turnaround, for which it recceived $A130m ($NZ140m).

Net profit (excluding revaluations, amortisations and revenue from the spin-off of Australian Wealth Management) rose 67% to $42.7m.

Total Revenue rose 8% to $1.1 billion.

Earnings per share excluding the profit on the sale of AWM, goodwill, amortisation and revaluations - increased by 82% to NZ11.3c.

"The year's encouraging operating result was achieved despite a tough second half for the NZ insurance businesses," managing director Jim Minto said.

He said the new management team had created momentum for further growth in Australia and New Zealand.

Tower Australia net profit increased from NZ$23.2m to NZ$35.1m with 40% growth in life insurance sales - almost triple growth of the overall market.

Tower New Zealand posted a net profit after tax from the investment business increased 26% to $2.4m. It was hit by restructuring costs and storm costs in the second half.

Tower chairman Olaf O'Duill said that in his experience, company restructurings took longer than first expected and this was proving to be the case.

Tower NZ Investments, awarded fund manager of the year, is New Zealand's second largest fund manager with an 18% market share.

The general insurance business recorded a $1.6m underwriting profit compared with a $5.7m loss for 2004.

The operating result for the NZ insurance businesses was affected by issues of poor service early in 2005 and is below management expectations, Mr Minto said.

The Tower Health & Life business, while recording a lower profit, was being vigorously renewed, he said.

In Australia, Tower continued to look to grow its retail and group life insurance businesses both by increasing market share and addressing the underinsurance gap, he said.

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