Tower insurance to cut $7m in costs - 108 jobs on the line

Tower insurance chief executive Richard Harding. Photo / Supplied

Tower says it will aim to cut costs by $7.2 million per year which includes a proposal for 108 redundancies.

The NZX-listed insurer announced the measures after revealing a half-year net profit of $14.9 million for the six months to March 31, up $3m on the same period last year.

Tower chief executive Richard Harding, said the result had been driven by a focus on its digital sales.

"Our strategy has focused us clearly on becoming a digital challenger brand taking on the big incumbents and challenging outdated industry norms."

Harding said as well as delivering growth and solidifying Tower's digital challenger position its new technology simplified and automated many functions which enabled productivity gains.

"Our strategy saw us growing our business from our existing cost base, making minor additional adjustments where needed."

But he said the recessionary environment means that its growth will now be lower than expected and to offset that it needed to reduce costs.

"We are currently working through a process to deliver cost savings of $7.2m per year, which includes a proposal for 108 redundancies, along with other cost-out initiatives."

Harding said it was also proposing to create 30 new flexible and part-time roles that would allow it to respond more effectively to the new digital ways that customers were interacting with it.

"At Tower we are a close-knit team and any processes or decisions that affect our people are never made lightly. We will be supporting our team through any changes that are made with the right support."

Tower also updated its full-year guidance for net profit after tax to $25m to $28m. It has proposed no dividend for the half.

In his half year report Tower chairman Michael Stiassny said the Reserve Bank had advised the financial sector to protect its solvency positions and preserve capital in light of the Covid-19 disruptions and an uncertain economic outlook.

"Given RBNZ's position, Tower's board has determined that no first half dividend will be paid, and any second half dividend will be determined in line with the company's full year results while considering economic conditions at the time."

Stiassny said insurance was a resilient business and Tower was in a strong position.

"... but industry will be impacted by global economic uncertainty."

Tower would not make a windfall gain from Covid-19 due to lower motor claims and would refund customers a portion of their premiums.

Harding will finish up with the company this year while new chief executive Blair Turnbull will take over the top job on August 1.