Market close: Tower Insurance slumps on earnings downgrade after storms

Insurer Tower fell 3.5c or 5.69 per cent to 58c after downgrading its full-year net profit guidance, citing upper North Island floods. Photo / Dean Purcell

The New Zealand share market had a familiar late surge, while Tower Insurance caused a stir with a significant earnings downgrade because of the impact of the recent flooding and cyclone.

After a choppy session, the S&P/NZX 50 Index climbed in the last 45 minutes to 11,942.49, up 53.47 points or 0.45 per cent. The index hit an intraday low of 11,873.09.

Volumes were light for the third day running, with 21.85 million shares worth $78.97 million changing hands. There were 82 gainers and 39 decliners on the main board.

Paul Robertshawe, chief investment officer for Octagon Asset Management, said it doesn’t feel like there’s a lot of new money coming into the market at present.

“While interest rates are high enough, people would rather have clarity on the direction [of the market] before taking money out of term deposit. And people have already got their [share] positions set.

“They are sitting and waiting and there’s not a lot of churn amongst portfolio managers,” said Robertshawe.

The market was cheered by a strong rally on Wall Street at the weekend. The Dow Jones Industrial Average had its biggest one-day gain since early January, rising 1.65 per cent to 33,674.38 points.

S&P 500 was up 1.85 per cent to 4136.25 points, and Nasdaq Composite rose 2.25 per cent to 12,235.41 on the back of a strong quarterly result from Apple which climbed 4.69 per cent to US$173.57 its highest level in nine months.

Regional banks also recovered, with PacWest Bancorp climbing nearly 82 per cent and Western Alliance up 49 per cent.

At home, insurer Tower fell 3.5c or 5.69 per cent to 58c after downgrading its full-year net profit guidance to $8m-$23m, from $18m-$23m. Tower is making further reinsurance arrangements and increasing its large events allowance from $40m to $50m.

Tower increased its guidance for gross written premium growth to 15-20 per cent, up from 10-15 per cent.

The upper North Island flooding is now expected to cost $195m-$225m with 5500 insurance claims and Cyclone Gabrielle $55m-$75m with 3350 claims. Tower expects to report a half-year loss of about $3m and will not pay an interim dividend.

Ebos Group was up 58c to $44.77; Fletcher Building increased 11c or 2.34 per cent to $4.81; Chorus gained 7c to $8.65; a2 Milk was up 5c to $5.76; and Freightways added 12c to $9.40.

In the energy sector, Meridian increased 11c or 2.06 per cent to $5.46; Contact was up 9c to $7.98; Mercury declined 6.5c to $6.38; and Manawa was down 6c to $4.90.

Hallenstein Glasson picked up a further 15c or 2.22 per cent to $6.91 as it enters the NZX top 50.

But Robertshawe said Hallenstein Glasson would be bumped out just as quickly if a company like freight forwarder Mondiale listed. “Telco 2degrees could also come to the market within the next 12 months.”

Mondiale indicated it would consider an initial public offer once the merger with Australia’s Visa Global Logistics was completed. But no timeframe has been set.

Westpac Banking Corporation, increasing 64c or 2.81 per cent to $23.44, announced a half-year net profit of A$4 billion, up 22 per cent on the previous corresponding period, and an increased interim dividend of 70c a share payable on June 27. Its net interest margin was up 5 basis points to 1.96 per cent.

Westpac NZ’s net profit fell 33 per cent to $426m which included $154m impairment charges for the recent weather events and worsening economic forecasts.

Of other banks, ANZ was up 12c to $25.65 and Heartland Group gained 2c to $1.56.

Comvita increased 11c or 3.74 per cent to $3.05; Skellerup Holdings gained 9c or 1.89 per cent to $4.84; Serko improved 7c or 3.14 per cent to $2.30; Gentrack collected 9c or 2.64 per cent to $3.50; Bremworth climbed 1.5c or 5.08 per cent to 31c; and Michael Hill added 2c or 1.85 per cent to $1.10.

Savor gained 1.5c or 4.05 per cent to 38.5c, ikeGPS was up 2c or 2.44 per cent to 80c and Chatham Rock Phosphate increased 1.7c or 10.83 per cent to 17.4c.

Mainfreight shed $1 to $70; Briscoe Group was down 10c or 2.22 per cent to $4.40; Smartpay Holdings fell 5.5c or 3.49 per cent to $1.52; and Winton Land decreased 4c or 2.11 per cent to $1.86.

Carbon Fund declined 8c or 4.57 per cent to $1.67, NZX was down 3c or 2.59 per cent to $1.13; Rakon decreased 2c or 1.85 per cent to $1.06; and Just Life Group shed 1.5c or 4.11 per cent to 35c.

TruScreen Group gained 0.005c or 17.86 per cent to 3.3c after telling the market its cervical cancer screening method has been recognised in a China Blue Paper as a leading-edge development.