Tower bruised but not bleeding

By Phil Boeyen, ShareChat Business News Editor

Wednesday 5th December 2001

Financial services and insurance group Tower (NZSE: TWR) has reported a steadier than expected profit for the year ended September despite falling equity markets.

Tower says its net surplus for the period of $77.2 million is "stronger than predicted in most forecasts" and compares to last year's $99.65 million. However it points out that last year's figure included a special reinsurance profit of $18.9 million.

Sale revenue fell considerably, to $1.223 billion from $1.7 billion previously.

Tower chairman, Colin Beyer, says the profit was made in a period that has been described by pundits as the worst investment climate in a quarter of a century.

"Sound operating profit across Tower's core business segments - Savings and Investment, Trustee Services, Asset Management and Risk Insurance - was achieved in a difficult business environment.

"Tower's strong operating profits and performance by our investment team enabled us to largely offset the negative profit impact (which we estimate to be $18 million in the year) of a 30% fall in global equity markets. The tragic events of September 11 aggravated matters even more."

The company reports that profits from operations rose 22% to $78.5 million, helping to offset investment returns on shareholders funds, which fell by 36% from $17.5 million.

Highlights for the company included keeping its position as New Zealand's top retail fund manager for the sixth year in row and making good progress in developing a strategic alliance with the Australian Credit Union.

"Through CUSCAL, 118 credit unions have signed incentive agreements supporting Bridges financial planning and master trust services. This will provide one of the most important platforms for Tower's growth in the years ahead," the company says.

Tower MD James Boonzaier says the 2001 financial year was a period of coping with a difficult market and building for the future.

"Premium income fell 11% to $945 million from $1.06 billion, but higher margin fees and other operating income rose 54.6% to $184.1 million - up from $119.1 million in 2000.

"This reflected the growth of more modern mastertrust and other business, the acquisition of Bridges, and the gradual erosion of more traditional lines of business."

Despite the tough operating environment Mr Boonzaier says the company remains in a strong financial position, with gearing improving to 36.1%, down from 39.1%.

Tower has declared a final dividend of 14 cents per share, matching its interim payout.

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