However the loss from continuing operations was just $400,000 compared with an $0.5 million profit in the same six months of 2010.

"Market conditions have continued to remain extremely difficult and challenging," the company said.

NZF's home loans division, of which it plans to sell 80% to Australia-based non-bank lender Resimac, made a $0.2 million loss in the latest six months compared with a $1.7 million profit in the previous first-half, mostly because of $0.8 million in charges against profit for bad loans, such as for leaky buildings, which weren't covered under reinsurance contracts.

NZF also wrote off $0.9 million from an IT project during the six months.

"Increased competition from the major trading banks for home loan mortgage products, combined with delays and uncertainties that have been encountered in NZF being able to announce a new business partner for its home loans division," also meant the mortgage portfolio's value fell to $169.6 million from $205.9 million a year earlier, adversely affecting profitability.

Shareholders are to vote on the Resimac transaction at a special meeting on December 12 and 56.6% of shareholders have already pledged to vote in favour of the deal which will provide NZF with about $5.25 million cash.

NZF says it plans to hold the cash "for liquidity and investment purposes, which will be given further consideration as part of a more in depth strategic review."