Tower's half-year results tomorrow are expected to show continuing improvement in the insurer and fund manager's earnings following last year's first annual profit in three years.
Macquarie Equities analysts expect net profit of $54 million for the six months to March 31, up from $20 million in the same period
last year, boosted by $32.8 million from the spin-off of Australian Wealth Management.
Excluding one-off items and goodwill, Macquarie predicts a 20 per cent rise in profit - compared with the same period last year - to $24 million.
Credit Suisse First Boston said the key factors should be Tower's Australian life insurance business, improved New Zealand general insurance profitability and a focus on returns rather than volumes.
Last November, when Tower posted a $54.6 million annual profit, chairman Olaf O'Duill said the board would consider resuming dividend payments this year.
Macquarie predicts a 2c-a-share fully franked dividend, but not until Tower's annual result in November.
Tower received A$130 million from spinning off Australian Wealth Management (AWM) on to the Australian Stock Exchange in February.
"Management has made no secret of its desire to acquire, so commentary in this regard will be of interest, particularly given rumours regarding PrefSure (the old Lumley life insurance book) being for sale," Macquarie suggests.
Jim Minto replaced Keith Taylor as Tower's managing director in February and the company has appointed several new chief executives to its seven business units. Minto said this was to create a clear focus of expertise and accountability for each line of business activity.
However, Citigroup Smith Barney suggests there is a "strong hint" Tower will split up each of its businesses, possibly by an AWM-style listing or through trade sales.
"Still, with AWM trading below its listing price, Tower's ability to execute this strategy is open to question," Citigroup said.
AWM shares yesterday traded at 89Ac, down from the A$1 issue price to Tower shareholders in February.
