Insurance and investment company Tower’s full-year profit is up by nearly $10 million thanks to improved performance in all divisions and an accounting gain brought on by low interest rates.

It has reported a profit for the year to September 30 of $50.09 million, up 23.8% ($9.62 million) from $40.47 million in 2008.

Part of the increase was due to an improvement in the discount rate for valuing life risk policy liabilities, which jumped 51.8% from $2.07 million to $3.15 million.

This was a result of the decline in the risk-free interest rates during the year brought on by the reductions in the OCR.

Before accounting for the discount rate the underlying profit after tax was $46.94 million, up 22.3% ($8.54 million) from $38.39 million last year.

Tower shares were up 5% (9c) to $1.91 on the NZX this morning.

Across the board improvement

All three of Tower’s businesses – Health & Life, General Insurance and Investments – have had better results than in 2008.

The Health & Life division reported an underlying profit of $31.6 million, up 19.7% ($5.2 million) on last year.

The General Insurance division saw a profit improvement of 16.9% ($2.5 million) to $17.3 million while Investments bounced back from the market turmoil of 2008 with a 56.8% increase in net profit after tax to $5.8 million.

Revenue from ordinary activities increased 6.7% to $517.2 million, while net tangible asset back increased from $1.36 a share to $1.46 a share.

Basic earnings per share was 24.31c on weighted average capital including the September rights issue, a 21.2% increase from 2008 when calculated on a comparable basis.

Dividend increased

Tower’s board has declared a dividend of 9c a share, which it said is effectively a 49% increase on last year’s dividend of 8c when the rights issue is taken into account.

“This result is a particularly strong performance with the background of a difficult financial environment,” Tower Group managing director Rob Flannagan said.

“Uncertainty has continued to dominate international and domestic markets during the 12 months to September 2009 however TOWER stood tall through all of this and has delivered an excellent result.”

Chairman Tony Gibbs said the recent share issue had improved the company’s liquidity and its cash balances at the end of the financial year were more than $146 million.

“There will be opportunities which TOWER is now in a position to take advantage of. We are very much looking forward to the next 12 months.”