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Hanover lifts Tower stake

Duncan Bridgeman

Friday 5th December 2003

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Hanover Group is set to lift its shareholding in Tower to above 10% as the troubled insurer scrambles to turn around its Australian businesses.

Chairman Mark Hotchin said Hanover was still "fairly bullish" on Tower, despite last week posting a $148.9 million loss for the year to September.

"Our view is the company is pretty much on track to where we want it to be ... we'll continue to creep up to somewhere above 10%."

Hanover emerged as a significant Tower shareholder this year during a scrap with Sir Ron Brierley's Guinness Peak Group to underwrite a $210 million recapitalisation rights issue. GPG holds 17% of Tower, while Hanover had been sitting on 9.47%, which has crept up to about 9.7%.

Hotchin appeared to have let the dust settle over a public spat over the appointment of two Tower directors in September, including former GPG director Maurice Loomes.

Hanover had claimed the appointment effectively gave GPG three seats on Tower's board, which it believed unfair given the size of GPG's stake.

Yesterday, however, Hotchin said he was confident Tower's management and directors could turn Tower around after a series of brutal writeoffs, mainly in Australia.

"GPG is good at fixing problems and adding value so as long as everybody is heading in the same direction we're pretty relaxed."

While Tower showed an improved second half, recording a $5.5 million net profit, Tower Australia continued to struggle, losing $6.6 million for the six months to September and $13.1 million for the full year. Tower appeared to be making some headway in fixing the Australian problems but the recovery was not as fast as the market would have liked. Tower was unlikely to exit Australia altogether although Hotchin said he had a foot in both camps.

"Both scenarios have their pluses and minuses ­ the short-term easy fix would be to sell Australia but that would tend to limit the growth opportunities of the company," he said.

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