TOWER releases Full Year Profit Result of NZ$54.6 million 

TOWER Limited (“TOWER”) today announced its results for the financial year ended 30 September 2004.  TOWER reported a full year profit of NZ$54.6 million, an improvement of NZ$203.5 million on the prior year (2003: loss of NZ$148.9 million).  Profit recorded for the second half of the year of NZ$34.1 million compared with NZ$5.5 million for the same period last year and with the NZ$20.5m profit reported for the first half of 2004.

This result delivers earnings per share of NZ13.4 cents (2003: loss NZ74.5 cents).

TOWER Limited Chairman, Olaf O’Duill said, “I am delighted with the progress that the 2004 financial results represent. They confirm that TOWER is well progressed through its two-year recovery phase. We are confident there is still further improvement to come, particularly once the proposed spin off of the Australian Wealth Management businesses is complete and TOWER moves to be a more specialised entity. The Board will consider the resumption of dividends to shareholders during the 2005 financial year.”

Highlights of the result include:

 Financial Results

 Net profit/(Loss) After Tax by Business Division

TOWER Australia

TOWER Australia’s life insurance product sales grew by 28% reflecting its improved product portfolio and service.   This was recognised by it recently winning the Silver Award as runner up in the Personal Investor 2004 Life Insurance Company of the Year Awards and the Gold Award for its trauma product.

Operating earnings increased 156% as a result of:

Experience losses and capital loss recognition reduced from NZ$33.2 million to NZ$11.7 million reflecting:

• improved lapse rates (risk – 2004:15% vs 2003:18%; investment – 2004:14% vs 2003:17%);
  
• recurring management expenses reduced from NZ$98 million to NZ$84 million;
  
• progress with product rationalisation and restructuring; and
  
• stronger investment returns driven by Australian equities.

Total assets under management in TOWER Australia were NZ$3.0 billion.

The appraisal value of TOWER Australia, including dividends, increased by NZ$73 million to NZ$520 million. TOWER Australia is carried in the financial statements at NZ$437 million.

Australian Wealth Management

Strengthening investment markets and solid business flow growth resulted in funds under management increasing by 18% in Bridges and 16% in TOWER Trust.

Net profit increased 46% to NZ$16.7 million due to cost reductions and increased revenues. Both Bridges and TOWER Trust recorded strong improvements in profit.

Approximately 50% of Bridges client referrals continue to be sourced through the Credit Unions. A new incentive based Credit Union remuneration scheme has been developed and will replace the existing scheme once it expires in 2005.

TOWER New Zealand

New business life and health insurance sales increased by 23% to NZ$24.6 million.

Operating earnings from life insurance increased by 97% as a result of:

• growth of in-force business;
  
• premium reviews; and
  
• improved experience performance.

General insurance premiums increased by 12%, however the profit result was reduced by storm
and flood claims in New Zealand (net NZ$2.9 million) and a write down in the value of IT systems (net NZ$4.4 million).

Net profit in TOWER Asset Management increased 27% to NZ$2.8 million as a result of strong revenue growth.

Retail funds management continued to face difficult market conditions with industry wide shifts out of managed funds.

Total assets under management in TOWER New Zealand were NZ$6.1 billion.

TOWER was named Fund Manager of the Year by FundSource.

Current focus

The TOWER Limited Board has announced its intention to spin-off the Australian Wealth Management businesses into a stand-alone listed entity, subject to shareholder approval. Much of the work has been completed to create the necessary infrastructure to allow Australian Wealth Management Limited (AWM) to be listed early in 2005.  The additional capital provided to TOWER from the spin-off will be invested in developing strong, sustainable market positions in its insurance and investment businesses in New Zealand and Australia, including potential acquisitions.

TOWER Limited Group Managing Director, Keith Taylor said, “TOWER’s 2004 financial result is evidence of the hard work undertaken to restructure the businesses. 

“TOWER will continue to focus on increasing the value of its businesses through sales growth and productivity improvements.  I am confident that TOWER is now well placed to lead the market in those segments in which it operates through continuing to enhance its product portfolio, raising customer service levels and further strengthening its relationships with its distribution partners.”

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