Takeover buzz limits Tower damage

TALK that Tower, the grand old lady of New Zealand's insurance sector, could attract a bid capped its losses in

The red ink had been well flagged and Tower sank three cents or 2.6% to A$1.14 as investors cast their eyes over the figures. Traders said the retreat would have been worse but for the speculation about an opportunistic bid.

The theory has cropped up in several research reports, with Tower's name linked with Promina, the insurer spun off by Britain's Royal & SunAlliance in May. Australian bank Westpac Banking, level at A$15.62, has also featured.

On paper at least a union with Promina could make sense. Promina, down one cent or 0.3% at A$3.29, is the third-largest player in Australia's insurance market, and the second-largest in New Zealand.

Tower said post-tax losses in the year to September nearly doubled to NZ$149m (£59m), weighed down by the writedowns. But the company added there were signs of progress in the latter half of the year, when it made a profit of NZ$5.5m.

Chairman Olaf O'Duill said an overhaul to put the business on a sounder footing was progressing well, though he remained just nine months into a two-year rescue drive. The Australian business has struggled against tough competition, and O'Duill has been seeking to cut costs and ditch unprofitable lines. 'To a large extent the net loss for the year reflects tough decisions we've taken to put the group on a better footing,' O'Duill said.

All of this - and the swirls of takeover talk - are important to Sir Ron Brierley and his Guinness Peat Group. GPG controls about 17% of Tower, a stake it has raised significantly over the past year.

The Australian market traded sideways as the warm afterglow from the robust third-quarter growth figures from the United States was cancelled out by the pain felt by companies hit by the buoyant Australian dollar.

Miner BHP Billiton, which typically gets a lift from signals that the global economy is doing well, dipped eight cents or 0.7% to A$11.07. Sector peer Rio Tinto traded at A$34.30, down 15 cents or 0.4%. The All Ordinaries edged ahead 1.3 points to 3198.70.

Tokyo stocks did better, especially the carmakers, which were driven higher on the belief that US sales would continue to do well. Honda Motor rose 110 yen or 2.6% to 4340 yen, Nissan Motor advanced 41 yen or 3.5% to 1214, and Toyota Motor gained 60 yen or 1.9% to 3200.

Major exporting duo Sony and rival Matsushita Electric Industrial gained on the better sentiment spurred by the revised US data. With the world's largest economy growing at its best rate for close to two decades, Sony was up 20 yen or 0.5% at 3710 yen, while Matsushita gained 12 yen or 0.9% to 1398. The Nikkei 225 rose 184.63 points to 10,144.83.

South Korean carmaker Hyundai Motor, which sells more than half its output outside the country, climbed in tandem with its Japanese counterparts. Its stock was better by 2100 won or 4.6% at 44,700 won.

The Korea Composite Stock Price index also strengthened as fears abated about the health of some of country's credit card companies. It firmed 14.9 points or 1.9% to 782.95, aided by gains for Kookmin Bank, which climbed 1050 won or 2.5% to 42,900.