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The New Zealand Stock Exchange has taken besieged trans-Tasman life
company Tower to task over the adequacy of its market disclosure after its
shares halved last week in the wake of a profit warning.
In a letter to the company, the NZSE asked Tower when it had become aware of
its adverse financial results, which included seven different one-off items,
which would result in a net loss for the year to September 30 of at least $NZ30
million ($26.3 million).
Tower claimed it had only become aware of the problems on October 30 when a
six-month actuarial review was nearing completion; at the same time the group
was completing a review of the carrying value of some capitalised items.
These figures were put to the board meeting on November 1, a day after the
company put its shares in a trading halt.
A large number of Tower's problems relate to its Australian life operations
but acting chief executive Keith Taylor said last week the group did not have
solvency issues and would return to normal profits in 2002-2003. Tower closed 7c
lower at $1.50.
When the NZSE asked why the adverse items were not known before the trading
halt, Tower said the actuarial review was complex and took some weeks to
complete.
``The review of carrying values of capitalised items is an end-of- year
process carried out in line with a normal timetable," it said.
However, at least two of the items were not actuarial in nature: $NZ9 million
in redundancy and termination payments including a $NZ2 million payment to
former managing director James Boonzaier; and $NZ4 million in due diligence
costs relating an uncompleted takeover of Royal & Sun's financial services
operations.
The NZSE also asked why Tower had conducted analyst briefings which made no
mention of possible write-offs during the actuarial review, to which the
company replied that it did not discuss future results during those briefings.
A revaluation of Bridges, the financial planners bought for $168 million in
September 2000 and since revalued up to $198 million, is possible after an
independent review is completed this month.
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