Insurer’s result worse than expected amid stiff competition and increasing claims.

New Zealand shares fell as Tower dropped after reporting a wider full-year loss and Air New Zealand dropped to an 18-month low while Kathmandu Holdings recovered on optimism a cold snap across the country will boost sales of winter clothing.

The S&P/NZX 50 Index dropped 35.12 points, or 0.5 per cent, to 6872.65. Within the index, 28 stocks fell, 15 gained and seven were unchanged. Turnover was $171.5 million.

Tower led the index lower, dropping 11.9 per cent to a three-month low of $1.56 after the general insurer posted a wider first-half loss of $8.7 million, including an impairment charge against IT.

"It was probably $3 million worse than we expected," said David Price, a broker at Forsyth Barr.


"The general insurance market is relatively flat, there's increased competition and increasing claims."

Air New Zealand fell 2.8 per cent to $2.06, the lowest since November 2014. It has dropped 20 per cent since March 30 when it announced it had hired investment bankers to look at a sale of its 26 per cent stake in Virgin Australia, less than a fortnight after committing to a one-year, A$131.2 million loan to the airline, and has faced increased competition as oil prices have slumped to record lows.

"At the moment, with the lower oil price, you're just getting a bonanza of cheap international travel," Price said.

Metro Performance Glass dropped 2.7 per cent to $1.83, Sky Network Television shed 2.6 per cent to $4.16, and Spark New Zealand declined 2.4 per cent to $3.645.

A2 Milk was down 1.9 per cent to $1.56. Last week, First NZ Capital sent out a note to clients that the strength of A2's patents was set to be tested with a number of unrelated firms either launching or preparing to launch milk products with the A2 variant protein.

Price said the fall may be related to changes to tax in China, which is one of A2's biggest infant formula markets.

Kathmandu Holdings was the best performer, up 4.8 per cent to $1.52, having fallen to a seven-month low of $1.43 last week.

"It's probably up for the same reason it was down - people looked out the window," Price said.

"The irony for Kathmandu is their big period is June and July, and up until 10 days ago their new winter stock hadn't even hit the stores. Now people are going, it's a bit more gloomy outside - that's as fickle as it has been.

"We've had a cold snap for three or four days, the stock has had a good re-rating in the past two days, but until the main sale gets under way in earnest it's probably a bit premature to be taking a position."

Heartland Bank gained 1.7 per cent to $1.22 and Orion Health Group rose 1.3 per cent to $4.62.

Outside the main index, Vista Group International rose 2.2 per cent to $5.98. The cinema software and analytics firm, which was named PwC Hi-Tech company of the year at New Zealand's annual Hi-Tech Awards, has inked its first deal to provide its cinema software to theatres in Africa. Shares were sold in the 2014 initial public offering at $2.35 apiece.