Tower profit up 66 per cent

Proceeds from the sale of the Australian arm of its wealth management business, a benevolent market climate and the completion of a successful two year recovery strategy have helped New Zealand-based insurer Tower post a half year profit up 66 per cent on the corresponding period in 2004.

In a half year where Australian equity markets posted some of the highest returns on record, Tower’s operating profit to the half year to March was NZ$20.1 million. This figure was boosted by a net profit after tax of NZ$55.3 million which included a NZ$23 million gain from the demerger of it’s wealth management business, Australian Wealth Management.

The rest of the trans-Tasman insurer’s profits were lifted by a 12.2 per cent rise in in-force premiums and a significant reduction in the number of lapsed policies.

Since the group posted a NZ$148.9 net loss after tax in 2003, the group has instituted a two year recovery strategy which involved cutting its cost base, cutting staff, installing a new management team and revising commission structures, product definitions and underwriting processes.

The two year strategy was wrapped up earlier this year and coincided with the resignation of chief executive Keith Taylor, who was replaced by Tower Australia chief executive Jim Minto. Chosen for his previous role by Taylor, Minto was largely credited for turning Tower’s Australian risk business around.

“The result is 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,” said Tower chairman Olaf O’Duill.

Earnings per share, excluding discontinued businesses and proceeds from the sale of AWM, increased 35 per cent for the half year from NZ5 cents to NZ6.7 cents. O’Duill said today’s positive results would lead to a possible increase in dividends at the end of the financial year.

Overall, it has been a good several years for the risk insurance industry with last November’s DEXX&R Life Analysis Leading Indicator Report finding total new annual premiums, which include all ordinary and superannuation risk annual premium products, increased by 7.5 per cent to $857 million, over the 12 months to June 30, 2004. Competitors of Tower such as AMP, Zurich, MLC, Challenger, AXA and Prefsure have all experienced growth in annual premiums since equity markets picked up two years ago.