Tower to combine units, reach out to adviser groups
Tower announced a 16% rise in profit to $58.1 million and revealed plans to integrate its three business units and build stronger relationships with professional independent adviser groups.
Wednesday, December 1st 2010, 10:44AM
by Benn Bathgate
Tower group managing director Rob Flannagan said it had been a good financial year for the company with "profit in all parts of the group apart from investment."
Tower also announced plans to "move to a functional model that leverages all of the group's natural assets."
Flannagan said that would involve combining sales and marketing for Tower's three units; investment, general insurance and life and health, to achieve "greater penetration to customer base."
He also said the company would be making greater efforts to build relationships with professional and advisor groups.
He said that in the current climate of increased regulation Tower is well positioned to build successful relationships with adviser groups thanks to its compliance and business planning expertise.
Flannagan said Tower viewed the regulatory changes as positive - "a good thing as that increases professionalism."
Tower already has a network of tied advisers and Flannagan said they hoped to reach out offering products to new groups where "we would be their manufacturer."
Plans for the opening of full service branches and a growth in internet and call centre services would also form part of the overall strategy Flannagan said would position the company for "faster growth."
Excluding its general insurance operations, the company's two other units' experienced varied fortunes.
Health and life reported a $33.2 million full-year profit, up from the year earlier figure of $31.6 million while the investment unit saw profit fall from $5.8 million to $2.8 million.
Even within the health and life units fortunes were mixed, with a reduction in health profit offset by an increase in profit for life business.
Tower's health operations reported a 31% fall in profit to $7.5 million despite a 3% rise in net premiums to $135.9 million. Claims (excluding maturities) were up 11% to $82 million.
Its life unit saw profits up 33% to $31.7 million, though incurred claims were up on 2009 at $69.3 million.
Tower's investment operations saw profits down $3 million from the 2009 figure of $5.8 million to $2.8 million.
Flannagan cited the "growth in lower margin products such as KiwiSaver" and business restructuring costs for the reduced profit.
He said with KiwiSaver "purely a volume business" Tower aims to increase its market share.
"We can grow that, I would argue we could handle twice the volume," he said.
Despite an 8% increase in funds under management to $3.9 billion total fee income was down 4% to $38.1 million - a reflection of KiwiSaver's lower margins for fund managers.
Tower chief financial officer Eric O'Sullivan said in the wake of the restructuring the investment operations are "now positioned for growth in a new investment environment increasingly dominated by KiwiSaver."
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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