Tower posts $154 million first half net loss

12.00pm

Troubled Australasian insurer Tower posted a first half net loss of $154 million today and announced details of its capital raising.

The company said it would place 50 million shares with 10 per cent shareholder Guinness Peat Group at $1.35 per share in its bid to raise capital.

Tower shares were down 5c at $1.45 just after the announcement today.

The company said earlier this month it would report a loss of more than $180 million for the six months, although it expected an operating profit of between $3 million and $6 million.

Some analysts had forecast the new shares would be priced as low as 57c.

To complete the $200 million capital raising, Tower will also undertake a pro-rata renounceable rights issue of $135 million with an exercise price of $1.00.

GPG will underwrite the rights issue, which will have a record date for calculation of entitlements of July 4, the company said in a statement.

Shareholder approval will be sought at an extraordinary general meeting on July 4.

Directors will also recommend removal of the 10 per cent share cap.

The loss today compared with a net profit of $40.67 million for the same period last year. The company declared no dividend.

"The result was significantly affected by accounting adjustments, which reduced the carrying values of group subsidiary companies ($134.4 million)," the company said.

The net loss was better than the forecast loss because of a $27.4 million one-off gain through an accounting adjustment of Tower shares held by Tower life insurance funds.

However, the adjustment reduced shareholders' funds by a net $27.3 million.

Excluding the one-off items, Tower's net profit after tax was $7.6 million.

"This result was adversely affected by poor investment markets, net outflows of funds and capitalised losses, but did benefit from good expense control," the company said.

Assets under management fell 6 per cent during the six months to $19.4 billion.

"The result is a significant turnaround compared with the net loss after tax (excluding one-off items) of $16.7 million for the six months ended September 30, 2002."

Chairman Olaf O'Duill, said: "We have had to deal with issues such as the negative market and business impacts of Tower's 2002 loss, significant restructuring and reorganisation of our businesses, and the resolution of regulatory capital and solvency issues.

"However, huge strides have been taken and the board considers that the tough decisions made thus far are essential to Tower's future strength."

But shareholders have been less than impressed with Tower's two profit warnings since November. The company's shares, which traded at $3.55 prior to the warning, plummeted to $1.70 and have not recovered.

As well as clearing the books, during the period the company took on a new chairman, new board, new group managing director and new major shareholder.

The capital raised will be used to reduce corporate debt.

- NZPA