TOWER has reported a 5 per cent increase in first half net profit and says it expects to post full year underlying profit within analysts' forecasts.
Shares in Tower tumbled to the lowest in a year after the life insurer also said that it would sell new shares to raise $96 million in new capital to support growth opportunities.
Tower said it would launch a one-for-seven renounceable pro rata entitlement offer priced at $1.85.
The issue price compares with $2.38 at close yesterday.
At 12.37pm (AEST), Tower shares had dropped 26 cents, or 11 per cent, to $2.12.
Funds raised would be used to "pursue and support growth opportunities as they arise over the medium term", Tower said.
The equity raising was fully underwritten by Citigroup and Credit Suisse, Tower said.
Tower said the company's largest shareholder, Japan's Dai-ichi Life Insurance Company, would take up its full pro rata entitlement.
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Chairman Rob Thomas said the raising was "all about ensuring we are in the best position to take advantage of opportunities and build shareholder value over the longer term".
Future growth opportunities would arise from the anticipated strong growth in the Australian life insurance market, which was continuing to grow at over 10 per cent per year, Tower said.
Potential new group life mandates and new life insurance distribution alliance partnerships were also future growth opportunities.
Tower also said it expected to benefit from industry consolidation.
Tower said net profit was $28.4 million for the six months to March, up from $27.1 million in the prior corresponding period.
Mr Thomas said the half year result was "solid".
"While one can never sit comfortably, we are on track as a business," Mr Thomas said.
"Tower Australia has performed very well despite the global financial crisis and the uncertainty in local and world economic markets."
Tower chief executive Jim Minto said the business continued to perform well in a market where growth was underpinned by the recognition among many Australians that they were under-insured.
"Pleasingly, more people are recognising the value life solutions bring to them in helping manage personal risks," Mr Minto said.
In terms of the outlook, Mr Minto reaffirmed guidance presented at a recent analyst briefing, when Tower expected full year underlying profit for fiscal 2010 to come in "within the consensus of analyst forecasts" between $77 million and $92 million.
"This remains our view," Mr Minto said.
"The prospects for Tower Australia remain good with the company well placed as an independent insurer and the market for life insurance continuing to grow above 10 per cent per annum."
Tower reported underlying net profit of $74.5 million in fiscal 2009.
Tower declared no interim dividend, but said it was the company's "current intention" to maintain a dividend of at least 5.25 cents per share, payable after year end.
"New shares issued under the entitlements offer will rank equally with existing shares in respect of these dividends," Tower said.
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