Tower pays first interim dividend in eight- years

Insurer and fund manager Tower is paying its first interim dividend in eight years on the back of a rise in half-year profits.

Net profit of $28.1 million for the six months to March 31 was up $1.5 million or 5.6% on the same half last year.

A fully tax-paid interim dividend of 4c per share will be paid on July 2, the first since 2002.

Although demand for its products had been dampened in the tougher economic climate, a focus on cutting the cost of claims and expenses had generated good performance across its three divisions: Health & life, general insurance and investments.

- General insurance: Benign weather conditions were one of the reasons given for the 26.6% rise in net profit for the general insurance business.

- Health & Life division: Reduced management expenses helped boost net profit in the health and life business by 22.5% to$17.3 million.

- Fund management division: Tower Investments’ net profit of $2 million was down from $2.3 million for the same half last year, with $407 million under management -- 10% more than the same half last year.

An upswing in the value of Tower’s equity and property portfolios helped drive the 32% rise in net operating revenue to $269 million for the half, including a $62.8 million gain in investment revenue, against a $9.1 million loss a year earlier.

Managing director Rob Flannnagan said market conditions presented further challenges in next 6-12 months.

But after raising $46 million from its September rights issue, Tower was capital rich with a cash balance of $150 million at March 31 and ready to pursue expansion opportunities, he said.

“We have investigated several opportunities in the past few months and continue to do so.”

Tower had experienced some impact on sales from compliance associated with the incoming Financial Advisers Act and was budgeting under $1 million for training to see its financial advisers comply with the new rules around the provision of financial advice, he said.

Kiwisaver

Tower now has 82,000 members in its Kiwisaver scheme and just over $402.4 million in funds under management at March – 8% of the industry total.

That made Tower the sixth largest Kiwisaver provider and fifth largest among default schemes.

Tower’s Kiwisavers have an average of $4,900 invested, compared with a market average of $3,700

Mr Flannagan said the scheme was now profitable for the company, after breaking even last year and recording a small profit in the September half.

He said he was “slightly nervous” about the political game with Kiwisaver going forward, and significant profits from the scheme were still three-to-four years away.

“But if compulsory [workplace savings] came in that would be a different game,” he said.

Shares in Tower were up 3c to $1.87 at midday.

Chairman Tony Gibbs said the company delivered an annualised 13.7% return on shareholders’ funds and will continue its focus on cost reduction, profitability and delivery of good returns to its shareholders,”