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Mid-sized life insurer Tower warned last night it was facing an annual
loss of $NZ30 million ($26.3 million) to $NZ40 million after a series of
write-downs and weak investment markets seriously dented the company's growth
prospects.
The forecast for the year to September 30, a marked turnaround on the 5 per
cent higher interim profit of $NZ40.7 million, does not include a possible
writedown on the Australian financial planning business, Bridges Financial
Services, bought in September 2000 for $168 million.
This business is suffering a margin squeeze, according to Tower.
In a better sign, Tower indicated it hoped to sign a new chief executive
within the next month, with Keith Taylor acting in an interim capacity since the
resignation of the long-serving James Boonzaier in July.
Most of the writedowns relate to the Australian business, whose acting boss,
Andrew Moon, replaced yesterday by Tower executive Jim Minto.
The biggest component of the writedown is $NZ24 million in capitalised IT
expenditure, a similar move to that made recently by banks St George, Westpac
and ANZ.
But there is also $NZ9 million in staff expenses, including a $NZ2 million
retirement payment to Mr Boonzaier, and write-offs on capitalised losses in the
tough disability or income protection business.
Mr Taylor played down the losses. ``I don't think there's any concern for
policyholders. We are still very strong in terms of our capital situation."
He denied Tower was having big problems with its back office operations in
Australia, saying ``all insurance companies struggle with their back office a
bit".
Tower also had $15 million in experience losses, mainly from policy
surrenders by clients.
Mr Taylor said the losses did not necessarily mean Tower could not make a
major acquisition, despite reports this week that it is not in a position to buy
the Australian financial services operations of Royal & Sun Alliance.
Tower did however confirm that it ``has been considering an acquisition and
has carried out extensive due diligence and the associated costs had been
expensed, suggesting the deal would not proceed.
Tower will release full results on December 5. It halted trading in its
shares on Thursday ahead of yesterday's board meeting.
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