Tower returns to profitability

By Jenny Ruth

Thursday 27th May 2004

Tower has reported a significant turn-around in profitability, mostly reflecting much smaller write-offs and the problematic Tower Australia moving from losses to profits.

The company reported a $20.5 million net profit for the six months ended March compared with a $148.9 million net loss in the same six months a year earlier.

One-off losses fell to $5.7 million compared with $162 million in the previous first half year.

At the operating earnings level, a $14.6 million profit compared with a $4.3 million loss previously.

Tower Australia contributed a $10.5 million profit compared with a $0.5 million loss in the same period last year and compared with a $6.6 million loss in the second half of last year.

The Australian wealth management business, which includes Bridges, lifted profit 33.8% to $7.7 million while the results from the New Zealand businesses were flat.

Tower shares rose 6 cents to $1.55 after the results were released.

"All in all, I think this is what we would regard as a good result," managing director Keith Taylor told journalists.

He says the company is only 14 months into a two-year recovery program and the issues the company has had to address would not have fixed themselves. "We're only part way through the recovery process and there's more to be done, but we're much closer to the end and we're more confident of success."

The restructuring has resulted in staff levels falling from about 1,800 to 1,500 now.

The continuing focus in Tower Australia is on increasing risk sales, retention - lapse rates fell from 18% to 14% in the six months - and cutting management expenses, Taylor says. It is now a specialist risk business with a 6% market share in Australia.

Tower's overall management expenses fell from $171.5 million in the previous first half to $141.4 million in the latest half year.

In New Zealand, net profit from insurance operations was unchanged at $10 million compared to the first-half last year and down from $11.8 million in the second half last year.

Taylor says that reflects the impact of claims after the floods in the lower North Island in February and March which totalled $2.2 million after reinsurance cover.

Chairman Olaf O'Duill says despite the return to profitability, the board has decided it isn't time to resume paying dividends yet, but that directors will revisit that decision when the full-year results are known.

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