Insurance and financial services company Tower said the impact of Christchurch earthquake-related claims would mean its annual net profit for the September year would be $9.4 million lower than market expectations, which were for a net profit of $50.1m.
Tower said the impact of the Christchurch earthquakes continued to involve elements of uncertainty for the company and that the board considered it prudent to be conservative when providing for the amounts that would be paid to affected policy holders.
"While claims have not dented Tower's underlying financial strength, market expectations of Tower's net profit after tax for the year ending 30 September 2012 should be reduced by $9.4m to take into account increases in claims provisions relating to the February 2011 event," the company said. This equates to a one-off impact of 3.5c per share.
Tower said that while its reinsurance cover for the earthquakes had not been fully utilised, continued notification of claims and the application of an appropriate risk margin, together with an inflationary allowance, would bring the total claims and provisions over Tower $325m of cover.
Since the Christchurch earthquakes, Tower has increased the limits on its reinsurance programme to $500m per event.
Managing director Rob Flannagan said Tower remained well capitalised at about $475m of equity, well in excess of regulatory capital requirements.
He said Tower had concluded a strategic review that began earlier this year.
The review involved a comprehensive evaluation of aspects of the Tower including capital structure, its existing four business units, and strategic acquisition and divestment opportunities.
Flannagan said Tower expected to be able to provide further information on the review next week. Tower shares last traded on Monday at $1.84.