Tower Australia Limited (TWR) Share Price

twr Company Profile

TOWER commenced business in New Zealand in 1869 as a government department selling life insurance policies and pensions.  It has grown and transformed over the past 139 years and its business today is mainly focused on selected niches in the risk insurance and wealth management markets.

TOWER Limited currently comprises three businesses:

General Insurance which provides home, contents, motor vehicle and travel insurance for the retail individual market in New Zealand and commercial insurance in the Pacific Islands. Health & Life which provides health and life insurance products for the retail individual and groups markets. Investments which operates in wholesale and retail funds management and individual and group superannuation. TOWER is also a default KiwiSaver provider.

TOWER's key strengths include:

Brand - the 'TOWER' brand has good levels of consumer awareness Business to business alliances and distribution relationships based around a partnership model Pacific Islands general insurance business which provides underwriting and earnings diversification Scale in health insurance and group life markets Broad product and distribution breath with general insurance distributed both direct and through alliance partners, health and life insurance products distributed primarily through intermediaries, investment products and services, both wholesale and retail, distributed primarily through intermediaries Investment Management capabilities.  TOWER was awarded the FundSource Fund Manager of the Year title in 2007 making this its third win in four years.

Financial

The financial year to 30 September 2008 saw a strong performance by TOWER in a market that was starting to become increasingly uncertain.

The $40.5 million net profit after tax was very pleasing in the current operating environment. It is 17.1% up on the comparable result for the previous financial year and represents a return of 14.7% on the average shareholders’ funds.

In view of this result, your Board has declared an after tax dividend of 8 cents per share, fully imputed. This is an increase on the 6 cents per share dividend paid for the 2007 year and will be paid on 9 February 2009.

The Group continues to build on progress made since the demerger two years ago. We have a flatter senior management structure, a renewed focus on customer service and a great team who are committed to making TOWER a successful business.

TOWER is well positioned to take advantage of opportunities that are likely to present themselves in the period ahead. We have a strong management team and efficient stable staff. Marketing and delivery of our products has been improved considerably and costs are being brought under tighter control.

We will, however, continue to ensure that the need to invest for the future is balanced with the need to generate adequate shareholder returns in the short term.

Highlights

Profit from continuing operations $40.5 million (up 17.1%)

Earnings per share 21.12 cents (up 28.8%)

Strong trading results from Health & Life (up 25.6%) and General Insurance (up 20.3%)

Return on shareholders’ funds 14.7% (up from 14.4%)

Dividend for shareholders increased to 8 cents per share (up by 33.3%)

History

TOWER’s origins go back to 1869 when the Government Life Insurance Office (Government Life) was created in New Zealand, with its initial capital provided by the New Zealand government. Government Life became a separate statutory body with the passing of the Government Life Insurance Act in 1953. It was renamed TOWER Corporation in 1987 and in 1990 ownership was conferred to its policyholders with the passing of the TOWER Corporation Act, allowing TOWER to be owned as a mutual association.

To remove growth constraints resulting from difficulties in accessing new capital under the mutual association structure, TOWER undertook a demutualisation process in 1999 with the approval of its policyholders and the High Court. The effect of this was to convert TOWER’s legal status to a shareholder owned company. Subsequent to the demutualisation, TOWER undertook a listing on the Australian and New Zealand stock exchanges in September 1999.  In November 2006 TOWER's New Zealand and Australian businesses were separated with the approval of its shareholders and the High Court.  TOWER Limited (the New Zealand business) is listed on the New Zealand and Australian stock exchanges and TOWER Australia Group Limited is listed on the Australian stock exchange.

Vision

To enhance value to our shareholders, we proudly develop lifelong financial partnerships with our customers and their families, based on professionalism and trust

Our Purpose

To help our customers protect and grow the things they value

Personal Mission

To achieve our vision and purpose, as part of TOWER, I take ownership for the delivery of my commitments to our customers, shareholders and co-workers

Our Behaviours

Working together

* to work with others towards a common goal or purpose

Superb service

* to give excellent assistance to our customers, internal and external

Transparent & fair

* to be open and honest in all our dealings with all people

* to ensure clear and consistent communication

Accountability

* to take ownership for improvement and for doing one's role

* to ensure our business is as simple and smart as possible

Innovation

* to strive for new or improved ways to deliver to customers and grow our business

Business Review

HEALTH & LIFEThe Health & Life division accounts for more than two-thirds of the TOWER Group’s annual profit and it has achieved stronggrowth in the last two years, with profit after tax increasing by more than 49%. It delivered a $5.8 million or 25.6% lift in after tax profit in the year to 30 September 2008. Premiums grew in all business lines averaging a 6% increase over the previous year to reach $193 million and policy lapse rates were down. The claims ratio is not yet at a satisfactory level and remains a key management focus. The Health & Life division has experienced strong growth in sales of individual risk products with a 20% increase over last year. This growth is based upon the enhanced distribution opportunities signaled last year and on strong relationships built with intermediaries.

GENERAL INSURANCEThe General Insurance division has produced another improved result with its profit after tax of $14.8 million up 20.3% on last year and an increase of more than 87% over the last two years. Within this, profit from the New Zealand operations grew strongly while the Pacific Islands business continued to perform well. General Insurance is beginning to show the benefits ofgetting the business fundamentals right – claims are being well managed and customers are more satisfied leading to significantly better rates of retention. The overall claims ratio of 59.4% for 2008 is consistent with last year even though it was adversely affected compared to the previous year by the impact of severe winter storm claims in New Zealand. An improvement was also achieved in the expense ratio.

INVESTMENTSReduced funds under management and ongoing investment in KiwiSaver and Portfolio Investment Entity (“PIE”) systemscontributed to a lower result for the TOWER Investments business which reported a $3.7 million profit after tax.The overall market that TOWER Investments operates in is currently extremely challenging with difficult investment markets affecting fund managers both locally and internationally. The amount of funds under management is reduced which has a direct impact on the income received from fees. However, we are firmly of the view that TOWER is in this business for the long term and we continue to invest to ensure the business is well positioned for future growth. TOWER is one of the major providers under the New Zealand Government KiwiSaver scheme which has grown faster than expected. As at 30 September 2008, TOWER KiwiSaver held $139 million of funds under management on behalf of more than 56,000 members. TOWER Investments was named 2007 FundSource Fund Manager of the Year for the third time in four years.

OUTLOOKTOWER is a powerful brand in New Zealand that has been built up over almost 140 years and our businesses will continue to strengthen their positions through competitive pricing, improved margins and proactive cost control. Despite the softening market conditions, we firmly believe that the outlook for TOWER is positive. We are a leading wholesale fund manager with a proud record of performance and we are in a strong position in the health & life market and in general insurance. We are committed to all of these businesses and our strategy is one of growth and leadership in the markets in which we operate.

For more information www.towerlimited.com