Tower's NZ businesses shine

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The New Zealand insurance business has been one of the shining lights for Tower in the past 12 months.

Thursday, November 27th 2003, 3:34AM

by Philip Macalister

The company reported, yesterday, a $148.9 million bottom-line loss for the 12 month period to September 30. While it made a loss in the first half of the financial year, it reported a small operating profit of $5.5 million in the second half.

The standout of its four divisions was insurance in New Zealand which reported an after-tax profit of $21.8 million. Its local investment business reported a profit of $1.2 million, compared to a $3.4 million profit in the corresponding period last year.

Tower’s biggest problem area continues to be Australia, where Tower Australia lost $11.7 million and its wealth management business reported a $10.2 million profit.

While some of the numbers are still in the red chairman Olaf O’Duill says progress is being made on turning the company around.

"The group is nine months into what we anticipate will be a two-year rebuilding process and to a large extent the net loss for the year reflects tough decisions we’ve taken to put the group on a better footing for the future," he said.

The key issues for the investment business in New Zealand are a $230 million decline in funds under management – and therefore lower fee income – and a shift in the mix of funds in Tower Asset Management to lower margin business. Group chief executive Keith Taylor says Tower Asset Management’s profit of $2.2 million is in line with expectations.

Going forward Tower is refining its product offerings in both the retail and wholsale markets, and is building a stronger distribution network through improved adviser services. The business is also reducing costs by consolidating operating systems and overheads.

In the insurance area Taylor says there have been "substantial profit increases in the New Zealand businesses of Tower Insurance and Tower Health & Life."

Tower Life though is a mature business which saw its profit fall from $3.9 million to $3.2 million. This was due to higher than planned lapse rates and lower mortality.

Tower says it sold Tower Trust to Sterling Grace for $3.2 million above book value.

O'Duill said a final dividend won't be paid. "The board intends to recommence payment of dividends when appropriate levels of profitability are met."

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