TOWER AUSTRALIA SHARES DROP 7 PCT AFTER EARNINGS RESULT

Tower Australia Ltd (ASX:TAL) shares have slipped seven per cent to a three-week low on profit-taking after the life insurer's earnings result failed to push the stock beyond Tuesday's record high.

The stock fell 23 cents, or 7.01 per cent, to A$3.05 by 1108 AEDT, its lowest since November 5.

The shares closed at A$3.30 on Tuesday, the highest since the company was separated from New Zealand's Tower Ltd in November 2006.

Tower Ltd also reported earnings on Thursday.

"It's had a wonderful run into the result and people are taking profits," EL&C Baillieu analyst Stewart Oldfield said.

Tower, Australia's biggest specialist life insurer, said underlying profit gained 10 per cent to A$74.5 million for the 12 months to September 30 as it won some significant contracts with AustralianSuper and IBM.

Net profit fell 32 per cent to A$46.4 million as investments were hit by volatile markets and because of a higher amortisations charge, Sydney-based Tower said in a statement on Thursday.

Tower focuses on underlying profit because it removes short-term unrealised gains and losses that have to be booked on the bottom line under Australian accounting standards.

Mr Oldfield said Tower's note that profit had been hit by higher-than-expected lump sum total and permanent disability (TPD) and group disability business claims in the last three months of the year also hurt sentiment toward the stock on the day.

Longer term, however, Mr Oldfield said the company had good prospects.

"They're a fast growing company evidenced by the speed with which they're getting new sales," he said.

"We would expect them to keep winning corporate relationships and they're positioned well in the industry."

Tower chief executive Jim Minto said a highlight of the year had been winning the AustralianSuper contract to provide life insurance to its 1.4 million members with an initial A$120 million in in-force premiums.

Tower also had been appointed IBM's life insurer for 11,000 members and about A$12 million in annual premiums.

That helped in-force premium grow five per cent to A$784 million by September 30, as it gained new business of A$96 million, up 54 per cent on new business in the prior year.

"Continued growth in both the life market and the Tower Australia business reflects the confidence of consumers in life insurance to help them meet their personal risks," Mr Minto said in the statement.

"The life industry remains highly attractive with independent market projections for strong growth to continue for the foreseeable future."

Chairman Robert Thomas said the company would focus on organic growth, but would consider takeover opportunities that come up.

Tower declared a final dividend of 5.25 cents per share, compared with 4.5 cents the year before. The company did not pay an interim dividend.

Tower said it maintained a conservative debt position, with gearing at 22.3 per cent.

"Tower Australia's overall capital position is strong and we maintain conservative levels of gearing," Mr Minto said.

That was reflected in Standard & Poor's upgrade of Tower's long-term credit rating to A, with a stable outlook.

Tower, Australia's fourth-biggest life insurer, increased sales across all segments of retail, group and direct.

In the group area, Tower had won a number of contracts on top of the AustralianSuper and IBM appointments.

Tower had launched a new electronic underwriting system for use by independent financial advisers, which would make it easier and quicker for them to apply for insurance for their clients.

InsuranceLine, Tower's direct sales business, also had been successful, the company said.

Mr Thomas said the presence of Dai-ichi Mutual Life Insurance Company on the share register added stability to the business.

Dai-ichi, Japan's third biggest life insurer, bought its 28.6 per cent stake in August 2008 for A$376.3 million.

Mr Minto told AAP last week that Dai-ichi's stake stopped any talk of Tower being a takeover target.

National Australia Bank Ltd (ASX:NAB) now is the country's biggest life insurer, after buying Aviva's Australian assets, in June, followed by Commonwealth Bank of Australia Ltd (ASX:CBA), then ING Australia, which ANZ Banking Group Ltd (ASX:ANZ) moved to fully own in September.