Auckland floods, Cyclone Gabrielle: Tower cuts earnings, dividend forecast

Tower Insurance has revised down its earnings guidance after the Auckland storm and Cyclone Gabrielle.

Tower has revised down its annual earnings and dividend forecasts after the Auckland and Upper North Island storm, and Cyclone Gabrielle.

The insurer now sees an underlying net profit of $18 million and $23m, down from a previously advised range of $27m and $32m.

“This guidance reflects positive actions taken by Tower to prepare itself for future events, including an increase in Tower’s large events allowance to $40m (up from $30m) and the expected cost of reinstating reinsurance arrangements,” the company said.

Consequently, Tower had revised its dividend forecast to 5 cents per share for the full year, from 6.5 cents per share.

Tower’s solvency position remained strong, despite the occurrence of potentially two catastrophic events so early in the financial year, it said.

A decision will be made on whether to pay an interim dividend when Tower’s half-year results are approved, in accordance with Tower’s ordinary dividend policy, acting prudently “and in light of information available at that time”.

Chief executive Blair Turnbull said Tower remained financially strong and was well placed to continue supporting customers and communities through the recovery.

“The personal and economic impacts of these events is a reminder of the critical role insurance plays in bolstering our collective resilience,” he said.

Claims for the Auckland and Upper North Island weather event from January 27 had slowed substantially since Tower’s last market announcement on February 9.

The insurer has received about 4850 claims to date in relation to this event.

Tower estimates the ultimate cost of the Auckland and Upper North Island weather event to be within the range of $95m to $125m.

The company had received about 945 claims for damage caused by Cyclone Gabrielle and is in the early stages of estimating its financial impact.

“Tower expects further claims as people in affected areas regain access to their properties and power and communications are restored.

“While there is insufficient information to estimate the ultimate cost of Cyclone Gabrielle, Tower expects it is likely to also trigger Tower’s reinsurance for catastrophe events, with an excess of $11.875m,” it said.