Tower Ups Interest In Medical Insurance

Sydney Morning Herald

Wednesday May 30, 2007

Danny John

RECENTLY listed life insurer Tower Australia has increased its exposure to the potentially lucrative private health insurance market as the industry prepares for what may well be a flood of floats in the sector.

Tower, which split from its New Zealand twin into separate stockmarket vehicles last November, has joined two of the major private health players, Medibank and NIB, both of which could join the specialist insurance company on the stockmarket within a year.

NIB, with which Tower has formed a joint venture business, has already announced its intention to float in the next few months whilst Medibank will be privatised, either through a listing or a trade sale, by the Federal Government if the Coalition is re-elected later this year.

Tower provides corporate underwriting facilities to Medibank and the insurer may well expand further into the sector to counter competition from another of the major private health players, MBF which recently acquired NRMA's life insurance business. MBF is also considering a listing.

Tower could expand by offering critical illness and related income protection policies as these would be a good strategic fit for its more general life insurance business, managing director Jim Minto said yesterday.

The company would use some of the knowledge gained from running private health insurance operations in New Zealand, a business that is now contained in Auckland-based Tower Ltd, of which Tower Australia was part before last year's demerger.

The move comes as the Sydney-based insurer announced its first results as an independent quoted company which showed a net profit of $17 million for the half year ending this March.

The result was down slightly on the comparable period a year ago but would have been $3 million higher if the company hadn't have been required to make an accounting change as a result of new international standards.

Its underlying business showed a 16 per cent rise in operating earnings to $21.6 million and Tower indicated it would pay its first dividend for several years in either of its guises at the end of its current financial year. The payout is expected to equal 25 per cent of net profits.

The company is also likely to change its name next year in a bid to separate it even further from Tower Ltd.

Tower Australia was steady at $2.30.

© 2007 Sydney Morning Herald

Back to News Index | Back to Home