In the Australian life insurance sector however confidence and market dynamics remain strong with growth at over 12% per annum.

Through this turmoil TOWER Australia Group Limited (TOWER Australia) remained focused on innovation, business simplification and strong performance across the board, underpinned by disciplined risk management and governance. All of this contributed to the company's growth and industry leadership and reflected in an improvement in our credit rating and two prestigious industry awards.

Key operational achievements for TOWER Australia in 2009 include record sales growth, the successful merger of InsuranceLine, outstanding product development, proactive claims management and new business simplification processes.

Resilience during GFC

TOWER Australia showed resilience during the GFC with strong governance and risk management systems. An upside to the GFC was an increased awareness and greater attention by consumers to life and income protection insurance. A number of growth opportunities are now occurring in the life insurance market and TOWER Australia will continue to assess these opportunities in a disciplined manner.

Successful year

Underlying net profit, which excludes non-cash items and normalises investment income, increased 10% over the year to $74.5 million. This is the key measure investment markets use when assessing TOWER Australia. The solid underwriting profit result reflects TOWER Australia's position in the life insurance market and its strong competitive market offerings.

Reported net profit after tax for the 12 months to 30 September 2009 was down 32% to $46.4 million due principally to investment market impacts and non cash items including a higher amortisation charge.

TOWER Australia's strong capital position, solvency cover at 2.4 times regulatory requirements, defensive high quality asset mix and low levels of debt stood it in good stead during the 2009 financial year and positions it well for the future.

Increasing returns to shareholders

The Board of Directors has declared a dividend for the year of 5.25 cents per share fully franked, which is an increase of 17%. This will be paid on 25 January 2010. The increased dividend reflects TOWER Australia's financial strength and the positive trend in underlying earnings.

New products and partnerships

TOWER Australia announced in September 2009 that it has been appointed as the new life insurance partner for AustralianSuper and its 1.4 million members. We are thrilled to be a part of AustralianSuper's plans to enhance its life insurance offer to its members in terms of service and claims management and be at the forefront of a revolution in how life insurance is offered to Australian consumers.

TOWER Australia's aim is to be the preferred partner in the group life insurance sector and to be recognised as being innovative, responsive and informative.

The successful merger with InsuranceLine and leveraging of its call centre capability into a number of TOWER Australia's Alliance partnerships during 2009 added significant distribution capability in the direct to customer segment of the market and complements TOWER Australia's strong position in the Advice and Workplace distribution channels.

Supportive cornerstone shareholder

Cornerstone shareholder, The Daiichi Mutual Life Insurance Company (Dai-ichi Life) is a very supportive shareholder. Dai-ichi Life is one of the world's top ten life insurance companies and its scale, extensive experience in life insurance along with its desire to support TOWER Australia's strategy, Board and management team has enabled the business to focus on its strengths - innovation, technical excellence, service delivery and broad based distribution - and successfully grow the business.

Active corporate governance

One of the keys to TOWER Australia's resilience in the past 12 months has been a strong and constructive relationship with the Australian Prudential Regulation Authority (APRA), which has focused the TOWER Australia Board on appropriate issues and provided useful feedback on our progress in addressing these issues throughout this period.

We face the prospect of significant regulatory change. TOWER Australia is monitoring this closely and is well-positioned to move quickly in a number of areas should any regulatory changes in the financial services sector occur which affect our business.

Fair Remuneration

The remuneration report in the Annual Report sets out in greater detail TOWER Australia's remuneration philosophy and framework. The TOWER Australia Board believes that the fundamental driver behind the Company's remuneration structure should be sustainable company performance. Remuneration is structured to drive 'sustainable' growth and long term returns to shareholders taking into account risk management principles and practices. TOWER Australia will continue to monitor closely the outcomes from the new APRA standards and the Productivity Commission in terms of remuneration but always remains mindful of developing remuneration structures that are appropriate and fair for this company and its stakeholders.

People behind our success

None of this would be possible without TOWER Australia's people. My thanks go to Managing Director, Jim Minto, his Management Team and all staff for their effort and enthusiasm and in continuing to deliver solid results for all stakeholders.

Staff turnover fell below 10% during 2009 reflecting to a large extent the success of our people initiatives built around organisational capability, employee commitment, engagement, accountability and loyalty - all essential elements for developing a business that is increasingly focused on the needs of its business customers and business partners. Our goal is to be the employer of choice in the life insurance industry.

I would also like to extend a sincere thank you to my Board colleagues. The two Directors from Dai-ichi Life, Takayuki Kotani and Tetsuya Kikuta, joined the Board in December 2008 and have been part of an effective and cohesive Board working together in a disciplined way in the governance and strategic development of our business. Issues arising from the GFC and proposed regulatory and industry changes, combined with an increasing number of growth and business opportunities for TOWER Australia, has seen the demands and workload of Directors increase substantially. Your TOWER Australia Directors have been diligent and tireless in their commitment to the Company.

Recognition by industry experts

TOWER Australia is very proud to have been named the Life Insurance Company of the Year for 2009 in the Australian Banking and Finance Awards and the Group Insurer of the Year in the inaugural Super Review Awards. These are terrific accolades to end 2009 on and a great way to start 2010.

Positive outlook

TOWER Australia's strategy is to achieve leadership in the Australian life insurance market with the interests of customers and business partners at the forefront. The continued strengthening of our competitive positions across the advice, workplace and direct distribution channels is critical to our success.

Improving access to life insurance for consumers is a key requirement for our industry. Life insurance delivers a very valuable social benefit to Australians who remain significantly underinsured. It provides vital financial protection to individuals and their families to enable them to preserve their way of life in the event of serious injury, illness or death.

TOWER Australia remains positive about the prospects for continued growth in the wider life insurance market in Australia (expected to treble to over $20 billion in the next ten years). We intend to remain at the forefront of innovation in the life insurance industry and are confident that our strategic objectives in terms of market and financial performance can be achieved.

Robert Thomas
Chairman