Tower's board delivers a New Year cheer-up

By PAULA OLIVER

After a rocky ride last year, Tower shareholders have been given the equivalent of a half-time motivational speech by the insurer's new board.

Tower's annual report, issued yesterday, focuses on the leadership and structural changes made last year in response to a series of poor financial results.

The report also reveals a big reduction in the number of staff with six-figure pay packets.

In a letter to shareholders, Melbourne-based chairman Olaf O'Duill describes the company's $148 million annual loss as "far from satisfactory".

His update includes details of a clean-out of senior management and directors and the shedding of non-core businesses, and reminds shareholders that Tower's turnaround is only at the half-way mark.

"We acknowledge that Tower has some way to go to achieve satisfactory profitability - and indeed, to restore credibility among some investors," O'Duill writes.

"When starting remedial actions in February 2003, we saw this as a two year programme.

"Significant progress has been made, but, consistent with those earlier expectations, there is still plenty to be done."

Dividends will be resumed as soon as the group's profits and balance sheet are restored to appropriate levels, O'Duill says.

The report reveals that the number of staff paid more than $100,000 a year in the company's Australian division - the source of most of its woe - has fallen dramatically.

In the 2001/02 year, 270 staff were in that category. Last year, there were 209.

The number of $100,000-plus pay packets has also been reduced slightly in New Zealand.

O'Duill also uses his letter to shareholders as an opportunity to thank Guinness Peat Group directors Tony Gibbs and Gary Weiss for their contribution to the company.

The two were controversial figures as Tower went through a tumultuous $210 million capital raising last year, but GPG remains the company's biggest shareholder, with 17.1 per cent.

Hanover Group, through a range of portfolios, holds 9.47 per cent of Tower and is its second-largest shareholder.

Managing director Keith Taylor says Tower Australia is expected to return to profitability this financial year.

Its operating costs have been reduced by more than 10 per cent over the past year.

Taylor also says that a key area of focus in Australia this year will be on retaining customers, in a bid to reverse a higher-than-expected number of lapses and surrenders in the second half of last year.