Tower’s first-half profit fell sharply as the insurer moved from last year’s unusually mild claims environment into a tougher period marked by storms, lower average premiums, and subdued market conditions.
The New Zealand and Pacific insurer reported a profit of $22.9 million for the six months ended March 31, down from $49.7 million a year earlier. Underlying net profit after tax also declined to $36.8 million from $61.7 million.
Tower said the fall should be viewed against an unusually strong first half last year, when weather conditions were more benign and claims experience was favourable. The company had already told the market that FY26 earnings were expected to be lower than the previous year.
This year, weather-related costs were much higher. Tower recorded four large events in the first half, with a combined estimated cost of $18.5 million, compared with $3 million in the same period last year. It has set aside $45 million for large events across FY26.
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The company has set aside $45 million for large events across FY26. The Wellington flooding in April 2026 will be counted in the second half of the year, with an estimated cost of $5 million. Tower said about $21.5 million of its large-event allowance remains available for the rest of the financial year.
While claims costs rose, premium growth remained limited. Gross written premium increased by 1% to $301 million, from $297 million a year earlier. Tower said this was due to lower average premiums, stronger competition, and growth in lower-risk properties, which are priced lower.
Even so, the insurer continued to add customers. Its customer base grew 5% year-on-year to 327,000, while New Zealand house policies rose 9%. Tower said more than 90% of new house policies sold during the half were assessed as low or very low risk for flood, sea-surge, and landslide.
“Over the 12 months to 31 March, we welcomed 15,000 new customers to Tower, with continued strong growth in house policies despite a subdued economic environment," CEO Paul Johnston said. "Competitive pricing is supporting customer affordability and growth, while our expanded risk based pricing is strengthening portfolio quality and reducing exposure to weather related impacts."
Johnston also said digital and operational initiatives, including an AI enabled contact centre and claims process improvements, are improving efficiency and supporting sustainable profitability.
The pressure from claims was also reflected in Tower’s business-as-usual claims ratio, which rose to 44% from 38% a year earlier. The company said this was due to targeted rate decreases and more storm activity. It said the ratio remained below its long-term average of 48% to 50%, but expected it to keep rising through the rest of the financial year.
Tower’s management expense ratio also increased to 31% from 30%, which it attributed to the softer premium cycle and continued spending on technology and growth initiatives.
The board declared a fully imputed interim dividend of 5 cents per share, down from 8 cents per share a year earlier.
Looking ahead, Tower lowered its FY26 gross written premium growth forecast to low single digits, from its previous guidance of 5% to 10%. The company cited lower average premiums and subdued market conditions, and said it does not expect economic conditions to improve in the second half.
