Tower beats profit forecasts by $3m

By RICHARD BRADDELL

WELLINGTON - Financial services group Tower measured up to forecasts with a maiden net profit of $73.1 million for the year to September, beating a prospectus projection of $70.6 million and last year's proforma profit of $68 million.

An unexpected bonus not accounted for in the result was a further $14.7 million in net tax-paid gains. This was arrived at after taking account of a tax refund dating back to the 1988 sale of a 30 per cent stake in Southpac and the partial offsetting costs of integrating the Australian life business of FAI.

But chief executive James Boonzaier said the better measure of earnings was the operating profit before interest and tax which jumped 22 per cent to $99.5 million from $81.8 million in 1998.

A dividend of 12c a share will be paid, imputed to 1c a share.

The share price, which dipped to 502c in a weak market following listing in September, yesterday firmed 10c to 560c.

The group, with the help of $A900 million ($114 million) in funds gained through the acquisition of FAI Life, had bettered its average growth of 25 per cent in the last decade with a 28 per cent jump in assets from $12.3 billion to $15.8 billion.

With FAI under its belt, 60 per cent of assets are now in Australia and the prospect of moving the head office over the Tasman had to be kept under review, Mr Boonzaier said.

The merger of FAI was expected to be earnings per share positive in its first year with annualised cost savings of $A7 million already achieved and the $A10 million target likely to be reached in the next 18 to 24 months.

The company was also looking to register an Asian company in the coming year. Although plans for expansion had yet to be formulated, the listing in September would provide access to the capital necessary to fund it, Mr Boonzaier said.

He said all areas of the group had performed well, with premium income jumping 39 per cent from $670 million to $932 million.

In Australia, Tower was ranked fifth largest life insurer in in-force premiums with single premiums jumping 65 per cent, compared with market growth of 25 per cent.

In New Zealand, Tower heads off Royal & SunAllliance (including NZ Guardian Trust) as the largest retail fund manager with $11.7 billion.