Sector: Insurance/Financial Services
Overview: Tower is New Zealand's oldest insurance company. They offer a full range of retail insurance options, with life insurance their biggest earner. Tower Investments is a growing business unit with $4.1 billion in funds under management, including the country's fourth biggest KiwiSaver scheme.
Pros: Uncertainty exists as major shareholder, Guinness Peat Group, looking to sell its 34 per cent stake in the firm. Any buyer will have to launch a full takeover offer under New Zealand takeover law. Tower is also conducting its own strategic review, including operational alliances and possible divestments.
Cons: Time lines for the strategic review as well as GPG's divestment are not certain and have been pushed out in the past. The insurance industry is also subject to one-off shocks, with Tower recently reducing its net profit expectations by $9.4 million to reflect claims from the Christchurch earthquake.
Price performance: Tower has fallen off recent highs of $1.87 to trade at $1.78, but is still up 16.3 per cent for the year.
Investment outlook: The insurance industry carries inherent risks, and Tower is not immune, however speculation around corporate activity could lead to increases in the share price. The stock offers a modest gross dividend yield of 4.37 per cent.
* A Broker's View is written by brokerage and investment adviser Hamilton Hindin Greene.
This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Should you wish to receive personalised advice please contact an authorised financial adviser.
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