Tower's first half profit climbs to $55.6m

Insurer and financial services group Tower has more than doubled its half year net profit to $55.6 million, boosted by a $23m gain on the sale of its Australian Wealth Management business.

Tower, which has been fighting back from a series of disastrous losses in recent years, said operating earnings for the six months to March rose 66 percent to $20.1m. The performance of its previously troublesome Australian businesses was a highlight of the period, the company said.

Tower Australia's npat (net profit after tax) was up 70 percent to $17.9m, fuelled by a 113 percent rise in operating earnings to $9.6m and $8.3m in investment returns on shareholders' funds.

This reflected strong growth in sales continuing reduction in lapse rates and a 10 percent increase in premiums, the company said.

Tower's New Zealand insurance businesses reported a 25 percent rise in npat to $12.4m with operating earnings of $9.9m and investment returns of $2.5m.

Tower chairman, Olaf O'Duill said the result was "further confirmation of the strength of Tower's recovery and is particularly satisfying given that it was achieved during a period of intense management activity associated with the spin off of AWM (Australian Wealth Management)".

"Tower has a stronger capital base and is now well positioned to move to its next phase of growth."

Mr O'Duill said the company's board and management remained committed to stronger returns on capital than currently being generated.

"However, in recognition of the progress being made, the board intends to consider the dividend policy at the end of this financial year."

Tower said other highlights of its result were Tower NZ's strong investment performance relative to benchmark, continued improvement in lapse rates across all product lines and a 12.2 percent increase in premiums across the group.

The group's capital base strengthened over the period and its credit rating was upgraded.

But new sales for its Tower Health & Life business declined to $9.3m down $2.2m on the previous corresponding period.

"Management has moved quickly to address this trend," the company said.

Tower's New Zealand fund management businesses which have a 17 percent share of the local market saw its npat fall to $0.7m from $1.2m for the same period a year ago.

Chief executive Jim Minto said Tower would look to improve the businesses' performance by focusing only on core, profitable areas and products.

"We will also look for opportunities to leverage our successful wholesale asset management capabilities into the New Zealand retail market."

Tower shares rose a cent to $2.00 following its result announcement.

- NZPA