CORRECTED - CORRECTED-UPDATE 1-NZ's Tower H1 underlying net profit up 29 pct

(Corrects to remove reference to near collapse in company executive's comments in third paragraph)

WELLINGTON, May 22 (Reuters) - Tower Ltd (TWR.NZ), New Zealand's No. 2 health insurer, reported a 28.6 percent rise in profit from continuing operations in its first half, driven by solid growth across all three of its divisions.

Tower, also New Zealand's third-largest fund manager and subject of a partial takeover offer, said net profit from continuing operations rose 28.6 percent to NZ$20.2 million in the six months to March 31.

Managing Director Rob Flannagan said the result represented a steady return for the company, which was trying to re-establish growth in its businesses.

Net profit after tax fell 91 percent to NZ$19.7 million ($15.3 million), reflecting the effect of a one-off gain of NZ$198.8 million in the previous period made from the split with its Australian business.

Shares in the company, which competes against overseas companies such as Australia's AMP Group (AMP.AX) and IAG (IAG.AX) and France's AXA (AXAF.PA), were down 0.5 percent at NZ$2.23 by 0044 GMT, having traded between NZ$1.70 and NZ$2.64 over the past year.

The company is the subject of a partial takeover from investment firm Guiness Peat Group (GPG.NZ), which has offered NZ$2.30 a share to lift its holding from 19.7 percent to 35 percent.

Analysts say the GPG offer, which values all of Tower at NZ$440 million, is probably too low to succeed, and there is little chance of GPG moving to take over the whole company.

Operating returns were higher from all three of the company's divisions: general insurance, health & life and investments. The company said it limited its claims and sales costs, although it did invest more money in staff and operating systems to comply with new government pension and tax schemes.

In an interview on March 31, Flannagan told Reuters the company wanted to see its net profit grow faster than inflation, and cement regular dividend payouts.

Flannagan said on Thursday a decision about whether a final dividend would be paid would be made towards the end of the full year. ($1=NZ$1.29) (Reporting by Adrian Bathgate; Editing by James Thornhill)