Small FY net loss predicted for Tower

NZME.

30 Apr, 2015 09:02 PM2 mins to read

Provisions around cover for the 2011 Canterbury earthquake prompted Tower to ask for its shares to be put on a trading halt. Photo / NZME.

Tower may record a small net loss for the first half after flagging an increase in provisions for Canterbury earthquake claim costs, while saying underlying earnings from its general insurer business grew strongly.

The company said today that it expects claim costs in relation to the Canterbury quakes will increase by between about $20.9 million and $22.4 million after tax to a range of $388 million to $397 million.

The adjustment is based on the latest quarterly actuarial review by Deloitte, and reflects 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, it said.

As of last month, Tower had settled 94 per cent of quake claims by volume and 85 per cent by value.

By the end of 2015 it expects to reach 95 per cent by volume.

The increased provisions have no implications for Tower's solvency as it had about $110 million of capital above the current solvency minimum required by the Reserve Bank as at March 31.

The company said it will continue with its capital management programme, under which it expects to return $34 million via a buyback of shares.

"The resolution of Canterbury claims remains a key operational priority for Tower, with a dedicated team committed to providing certainty for customers and shareholders as they work through outstanding claims," the company said.

It will release the final figure for its claims provision and associated impact on earnings with its first-half results.

Underlying earnings in the first half were $17 million to $18 million, which would be as much as 37 per cent up on last year's net profit of $13.1 million.

"The anticipated improved earnings result has been supported by premium rate increases, growth in Pacific earnings and investment earnings, in a benign claims environment," chief executive David Hancock said.