Auckland-based Tower reported a net loss of $4.9 million, or 2.99 cents per share, compared to a profit of $13.1 million, or 4.96 cents, a year earlier.
The insurer increased provisioning for costs associated with the Canterbury quakes by $22.6 million, slightly above the top of the forecast range flagged earlier this month, as projected rebuild costs rose due to labour and material shortages and higher building costs. That pushed the insurer's projected claim expense above its $325 million reinsurance limit for the major 2011 event.
The company signalled it would face higher claims expenses from the Canterbury rebuild earlier this month to reflect an industry-wide increase in costs and delays for repair and rebuild work, higher costs of complex multi-unit claims, and a clearer understanding of where claim costs fall between Tower and reinsurers. That increased cost was also captured in the Reserve Bank's recent financial stability report, which raised its estimate for industry claims to between $33 billion and $38 billion from a previous range of $32 billion to $37 billion.
The insurer settled 94 percent of all claims relating to the Canterbury rebuild as at April 30, and was carrying $51 million in capital above its minimum solvency requirements under the central bank's prudential regime.
"We are very pleased with the improvement in our underlying general insurance profit over the past six months," chief executive David Hancock said in a statement. "We have been busy implementing our growth strategy: transforming our customer interactions to drive revenue and efficiency, building our digital capability to take us into new distribution channels, and increasing our very strong position in the Pacific Rim."
Tower is looking to latch on to its 140-year history of providing insurance across the Pacific to access largely greenfield opportunities in Papua New Guinea, Fiji and the Solomon Islands, and it plans to launch in Vanuatu later this year.
The company entered into an alliance partnership with Trade Me, which Hancock said would be target distribution, without being more specific.
Tower didn't provide full-year earnings guidance, though Hancock said second-half performance was typically similar than the first six months of the financial year.
The company said the insurance industry will see growth in reinsurance costs following the Canterbury quakes which will put upward pressure on premiums, while technology advances provide opportunities to improve service while reducing costs.
Tower anticipates consolidation in the sector to continue, and it will participate where there is benefit to shareholders, though Hancock said the insurer is primarily targeting organic growth.
See Tower's latest financial result here:
