Tower has signalled it will be in the red when it posts its FY results next week after having to increase its provisions for the Canterbury earthquakes again.
The New Zealand insurer said it will report a loss after tax of approximately $7 million which compares to a profit of $23.6 million last year.
The gross increase in the second half provision for the February 2011 event is $53.2 million before tax, driven by increased repair and rebuild costs for the remaining claims and an increased risk margin.
However, the insurer said underlying earnings, which excluded the Canterbury earthquake impact, rose 12% to $28 million.
The company said in a statement released this morning that it maintained a strong balance sheet and would be well capitalised following the increase in provisions, as it held excess capital above the minimum solvency requirements of more than $70 million as of 30 September 2015.
“Consequently, the company expects the increase in provisions will not require an increase in its solvency reserves, nor result in any alteration to Tower’s capital management programme including the dividend policy or current on-market share buyback,” Tower said.
It said it had settled 95.6% of Canterbury claims by number and 88% by value as at 30 September 2015.
But due to the ongoing complexity and uncertainty surrounding the remaining claims it had appointed EY
to assist in a review of apportionment.
In April it put in place an Adverse Development Cover to protect the balance sheet from potential claims deterioration and said it expects the ADC to be fully utilised.
Most recently, the Board appointed Deloitte
as actuaries to provide additional expertise to the company’s own actuarial department which resulted in a file-by-file claim analysis.
“This approach has resulted in a greater level of detail and understanding,” Tower said.
“When combined with our actual claims experience on repairs and multi-unit dwellings, this has also helped provide a clearer picture of the likely costs for these more complex claims.”
It added: “The detailed analysis undertaken by the actuaries to understand these claims, their significantly smaller number, and the pace of Tower’s claims resolution progress in resolving claims provides the company with increasing confidence regarding the balance of the claims expense provision.”
The company said further details would be available when the audited full year results were released on Tuesday 24 November.