New Zealand shares fell as several large cap stocks gave up dividend rights, while insurer Tower dropped to a 12-year low.
The S&P/NZX 50 Index dropped 36.38 points, or 0.5 per cent, to 7,534.72. Within the index, 29 stocks fell, 17 rose and four were unchanged.
Tower led the index lower, down 19 per cent to $1.11. The insurer warned it expects a $16.2 million hit to its after-tax profit due to increased claims provisions for the Canterbury earthquake following greater-than-expected new claims from the Earthquake Commission (EQC) and increased litigation and customer disputes. It also signalled it will review its dividend and its dividend policy at its full-year earnings result.
Tower said it has about 560 claims remaining of the almost 16,000 claims lodged.
Still, it said the insurance industry has received more than 800 new claims in the past six months as EQC accelerates its programme. It's estimated more than 6000 EQC claims require remediation, and some of these will exceed the $100,000 EQC threshold, resulting in the cost being borne by insurers. Tower said it has also experienced a greater number of disputes and extended time to reach agreements with customers.
"One hopes it's at the end of it but it's down to the tail of difficult claims and the unknown extra over-cap claims from EQC," said Matt Goodson, managing director at Salt Funds Management.
"Tower's gone from having an extraordinarily strong balance sheet to having a satisfactory balance sheet in terms of capital positioning. The underlying insurance business is still travelling well. The market's weighing up what's still a satisfactory capital position, the multiples it's trading at and any further risks that may still be there to come out of Christchurch. As there's more and more information, there's less risk of a further blowout."
Companies giving up rights to dividends included Air New Zealand, which dropped 10c, the same as its final dividend payout, to $2.06. It also paid a special 25c dividend.
Trade Me Group shed a 9c dividend and declined 22.4c to $5.62. Sky Network Television, which gave up a 15c dividend, fell 12c to $4.92.
Orion Health Group was the best performer, up 4 per cent to $4.20. It had fallen 24 per cent between June and the beginning of this month, from a peak of $5.31 to $4.03.
"It's been very weak for several months, so it's just bounced on light volumes, there was no news behind the decline and no news behind the bounce," Goodson said.
Freightways gained 2.2 per cent to $7.05, Kathmandu Holdings rose 2per cent to $2.01, and Z Energy advanced 2 per cent to $8.60.
Outside the main index, Moa Group rose 5.9 per cent to 90c. The listed boutique brewer is to raise $4million via a placement and rights offer at 73c per share, and will use the funds to expand its sales team and for working capital and expenses.
Smiths City Group was unchanged at 70c. Chairman Craig Boyce and fellow directors Gary Rohloff and Tony Allison have survived an attempt by Sir Ron Brierley's Mercantile Investments to oust them from the board at yesterday's AGM in Christchurch.
Pan Pacific Petroleum fell 6.3 per cent to 3c. It has applied for voluntary delisting from the NZX due to low trading volumes, although it will stay on the ASX.