Tower's ratings affirmed

The company's life insurance subsidiaries in both Australia and New Zealand have kept their 'A'ratings while the overall group, together with its financial services business and Tower Holdings Australia, have been affirmed at 'BBB/A-2'.

The outlook on all ratings is stable.

S&P says the 'A' ratings on Tower's core operating subsidiaries reflects the group's superior business position in the New Zealand market and continued efforts to further build its profile in Australia.

"Australian operations now contribute more than two-thirds of the group's revenue, with growth in funds under management being significantly aided by acquisitions in recent years," says the agency.

"In its home market of New Zealand, Tower remains one of the leading funds management, insurance, and trustee service providers, holding the number one position in retail funds under management."

"In the larger and higher growth Australian market, Tower continues to build its market presence, as demonstrated by the acquisition of Bridges Financial Services Group Pty Ltd, which included a significant master trust."

However S&P also points out that premium and funds under management growth - excluding growth through acquisition - has been moderate in the past year, due largely to the effects of losing the Australian equity management team at the beginning of 2000.

Standard & Poor's says the stable rating outlook reflects its expectation that Tower's earnings will continue to grow based on increasing revenue and synergies expected from greater scale through the acquisitions.

"Tower's key challenges are to be able to leverage off its distribution network while restoring confidence in the independent financial advisors network, which is required to enable the group to generate good new business volumes."

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