Tower has reported a net loss of $4.9 million in the six months ended 31 March 2015, marking a significantly different picture to last year’s profit of $13.1 million
The direct insurer exceeded its reinsurance cap for the February 2011 event, and was forced to increase the provisioning for associated costs by $22.6 million.
Higher costs of labour, material shortages and higher building costs
pushed the projected claim expense above its $325 reinsurance limit for the 2011 event.
However, Tower bosses remained pleased with the positive underlying results reporting a NPAT of $17.9 million for the six months ended 31 March 2015, which was a 36.4% increase on the previous year
Tower chairman Michael Stiassny
said the results reflected the industry backdrop of rising premiums and fewer large claims events, as well as the benefits of the company’s strategy.
“Rising premiums, stabilising reinsurance costs, favourable weather, Pacific policy growth and prudent capital management have supported underlying shareholder returns,” he said in a statement released to the market this morning.
He added: “We are pleased to confirm today our intention to implement an on market share buyback of up to $34 million, or up to 10% of Tower’s issued capital, to commence shortly.”
Stiassny said the board was pleased to announce a half-year dividend of 8.5 cents per share unimputed, an increase of 30.8% on the prior corresponding period.
Tower CEO David Hancock said there had been significant progress implementing the company’s growth strategy in New Zealand and the Pacific during the half year.
He said the three key strategic pillars of financial performance, customer satisfaction and staff engagement were critical to Tower’s ongoing success.
“We have been busy implementing our growth strategy: transforming our customer interactions to drive revenue and efficiency, building our digital capability to take us into new distribution channels and increasing our very strong position in the Pacific Rim,” he said.
Tower’s alliance with Trade Me, agreed in December, was one such growth strategy along with the many opportunities offered in the Pacific Rim.
“We are currently preparing to enter the Vanuatu market, which offers a great growth opportunity aligned to our core competencies and experience in the Pacific Rim,” Hancock said.
Indeed, the Pacific Rim business represents more than a quarter of Tower revenues and earnings , the company said, and following the devastation of Cyclone Evan the previous year, policy numbers increased 7.7% compared to the prior corresponding period.
Tower also announced further progress on the Canterbury rebuild, with 94% of all claims settled and closed for customers as at 30 April 2015, up from 81% at 31 March 2014.
“While pleasing progress in claims continues, Tower has taken the prudent decision to increase provisions following the receipt of the latest actuarial review of projected claims costs,” the company said.
Tower said it was carrying $51 million in capital above regulatory minimum solvency requirements and a further $63 million of cash at the corporate level.