Tower 'not being broken up for sale'

Tower managing director Rob Flannagan.
Tower managing director Rob Flannagan.

Insurance company and fund manager Tower is still weighing up what to do with its business units - but it insists there will be no garage sale.

The NZX-listed firm beat analyst expectations to post a $55.8 million profit for the year to September 30, up 67 per cent.

It also announced plans to pay $120m of capital back to shareholders, the bulk of which would come from the recent sale of its health insurance division.

The deal followed a strategic review undertaken this year, with other options still being considered including alliances, wider distribution opportunities, and further divestment.

Tower group managing director Rob Flannagan said the company was "absolutely not" being pulled apart for sale.

"It's all about adding shareholder value. It's all about positioning power for the long term," he said.

"It's something that all companies do from time to time - in our case it's been quite public - and that's just the process we're going through."

However, he did not rule out the chance of another arm of the company being sold off: "Anything's possible."

Any further outcomes of the review are expected to be completed by the annual meeting in March.

Hamilton Hindin Greene brokerage director Grant Williamson said further sales would come as no surprise as Tower had struggled to achieve economies of scale within its individual businesses. The company itself had concluded it would not achieve the necessary scale of return in its health business in the immediate future.

"They either sell off each business unit individually and close the doors, or they retain one or two business units and look to expand - which would have to be by acquisition," said Williamson.

But the fact that Tower was moving cash off its balance sheet suggested it was probably not looking at the latter, he said.

Tower's profits slumped to $33.4m last year as it dealt with a flood of claims from the Canterbury earthquakes that exceeded reinsurance cover.

This year all four of the group's business units - Health, Life, General and Investments - reported improved profitability.

Flannagan saw the strong result as a sign of "getting back to business as usual".

The insurer was making industry-leading progress settling claims following the earthquakes, he said.

"To date, we have closed almost 60 per cent of claims and have made payments exceeding $200m, with over $3m being paid out every week."

David Stringer, of advocacy group Insurance Watch, said Tower was about "middle of the pack" when it came to the speed of processing claims.

However, that had improved noticeably in the current quarter.

That was good news for Tower customers waiting on rebuild dates or house repairs, particularly in the worst-affected areas, he said.

Tower shares closed 2.6 per cent higher yesterday, at $1.95, and have added 41c so far this year.

The insurer will pay a final dividend of 6 cents per share.

This will bring the total annual payout to 11c.

The Dominion Post