Tower stays tough on dividends

Tower chairman Olaf O'Duill told investors in Wellington yesterday that it was time to say goodbye. Marty Melville / Getty Images

Growth would continue to take precedence over dividend payouts, Tower chairman Olaf O'Duill said as he announced his retirement.

O'Duill told shareholders at the annual meeting in Wellington yesterday that although the transtasman insurer and fund manager's board would like to resume dividend payments "as early as possible, it's a question of preserving the capital base in order that you grow better and faster".

The Melbourne-based Irishman, who intends retiring by June 30, said the A$145 million ($159 million) PrefSure purchase, which was funded through a mixture of cash and debt, had not altered the board's stance that it would look for a doubling of half-year operating profit before resuming payments.

He said Tower would continue to look for acquisition opportunities and could issue new shares if extra capital was required to fund any buys.

Appointed Tower chairman after the company's earlier Australian misadventures, O'Duill has had a torrid time from shareholders, who have seen the value of their investments plummet and dividends dry up after the shock writedowns of Tower's Australian assets in 2002 and the subsequent string of poor results.

"I've stood here for three years apologising for us having stuffed up three years ago," he said when questioned by a shareholder about his commitment to the company. "We've moved on from then and we've rebuilt the company ... we've had the guts to stand in there and fix it."

After the meeting, O'Duill said he had worked on several business recoveries "and I have to say this was the toughest but, I guess, in some ways the most satisfying. Tower is well on the road to recovery now."

The PrefSure acquisition was evidence the company was travelling well. "On that that basis I thought it was a good time to say goodbye ... you won't hear from me again."

Tower's recovery has in fact looked pretty convincing of late. Last year, it successfully spun off its Australian Wealth Management business and then went on to boast a 67 per cent increase in annual operating profit thanks in part to the booming Australian life insurance market.

The PrefSure purchase, which doubled Tower's market share, better positions the company to leverage off that growth.

The couple of hundred investors who turned out yesterday gave O'Duill and his board, including chief executive Jim Minto and Guinness Peat Group boss Tony Gibbs, their easiest ride in some time.

Meanwhile, although Australia has been good to Tower in recent times, Minto reiterated that last year had been a disappointing one for Tower's New Zealand general, life and health insurance businesses due largely to some service issues. However, there had been good progress addressing those problems.