Tower’s full year profit dragged down by provisions and large claims

Tower Insurance CEO Blair Turnbull. Photo / Brett Phibbs / www.photosport.nz

Extra provisioning for the Canterbury earthquakes and possible customer remediation as well as higher claims for large events including the Tongan volcanic eruption has dragged down Tower’s full year profit.

The insurer made a net profit after tax of $18.9 million for the year to September 30, down from $19.3m in the prior financial year.

Tower’s bottom line was hit by an additional $5.5m Canterbury earthquake provision and a further $2.6m provision for customer remediation. Excluding those provisions Tower made an underlying profit of $27.3m, up from $20.8m in FY21.

That included its large event claims which were up from $13.9m to $19m largely driven by the volcano and storms in New Zealand.

However, the underlying business was strong with gross written premiums up 13 per cent to $457m and customer numbers rising 5 per cent to 319,000.

Tower chief executive Blair Turnbull said its strong result was underpinned by a strategy of delivering simple and rewarding customer experiences combined with advanced technology and digital and data capability.

“The decisive actions taken to combat record inflation, global supply change blockages, and increasing frequency and severity of large events together with consistent growth and strong underlying business performance, have delivered a strong result for shareholders.”

Its flagship Tower Direct business saw gross written premiums up 17 per cent to $320m.

Turnbull said its digitisation strategy had simplified the process of purchasing and managing insurance policies and making a claim on one online platform.

That platform - called My Tower - had now onboarded 200,000 customers, up 51 per cent on the prior financial year.

The insurer’s management expense ratio improved from 37 per cent to 36 per cent while its claims ratio reduced from 50.2 per cent to 48.9 per cent.

Turnbull said Tower continued to take action to address the increasing severity and frequency of extreme weather events. In FY22 it expanded its risk-based pricing model to include inland flooding and this would be expanded to coastal hazards in FY23.

The company had also increased its period allowance by 50 per cent to $30m and had renewed its reinsurance programme with $934m of catastrophe cover.

Tower declared a dividend of 4 cents per share bringing its full-year payout to 6.5cps, up from 5cps in FY21.

Tower’s shares are up 7.28 per cent to 69c over the past year.