Tower expects to end a three-year dividend drought in 2020 after getting its books back in the black this year on premium growth and a smaller claims bill.

The listed general insurer reported a net profit of $16.6 million in the 12 months ended Sept. 30, turning around a loss of $6.8 million a year earlier when it included the cost of a settlement with reinsurer Peak Re. This year's bottom line was dragged down by a $6 million charge from Canterbury earthquake claims that exceeded the Earthquake Commission's $100,000 cap.

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Tower's underlying profit more than doubled to $27.4 million, with gross written premium up 6.8 per cent at $296.6 million due to new customers, new pricing that sees riskier propositions face heftier bills, and customer retention.

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The insurer's claims ratio also improved to 52.2 per cent from 57.2 per cent, as benign weather helped offset a greater frequency of house fires and car windscreen claims due to increased traffic and roadworks.

Chief executive Richard Harding confirmed that the insurer won't pay a dividend for the year just completed, but said it will resume payments in the 2020 financial year.

Tower suspended dividends in 2016 to preserve capital as it raised provisions from the 2010 and 2011 Canterbury earthquakes and set up plans to carve out the remaining claims into a separate entity. That plan was scuttled after a takeover tussle which fell through on opposition from the Commerce Commission.

Since then, it has raised almost $120 million to bolster its balance sheet to ensure it meets solvency requirements, and also to buy 34,000 policies from controversial minnow Youi NZ.

The company has forecast underlying profit of $27-to-$30 million in the September 2019 year, with the Youi acquisition and positive market conditions offsetting increased costs of shifting to a new IT platform. Those costs are expected to fall off in the following year, and Tower has forecast a management expense ratio of less than 35 per cent in 2021, compared to the 40 per cent reported in 2019.

Tower estimated the Canterbury earthquake claims would total $916.9 million, of which $725.8 million was covered by reinsurance. That left it with a cumulative hit of $158.5 million.

The insurer said it is still at odds with the Earthquake Commission and reiterated litigation is likely to recover a net $53 million from the state disaster insurance fund.

Chair Michael Stiassny said recent improvements in the EQC regime haven't addressed a system that remained "fundamentally broken" and probably weighed on wider public perceptions of the industry.

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"A true step change in conduct and culture would see the industry join forces with the government for an honest and transparent appraisal of the EQC and agreement on a sustainable future model for the agency. An EQC that delivers fair customer outcomes would have the single greatest impact on restoring New Zealanders' trust in the industry," he said.

Tower shares rose 1.4 per cent in early trading, and were down 1 per cent so far this year.

- BusinessDesk