Tower shares dropped to a two-month low after the general insurer posted a wider first-half loss and flat gross written premium income, raising questions about its ability to compete with larger rivals.
The Auckland-based insurer reported a net loss of $8.7 million, or 5.42 cents per share, in the six months ended March 31, from $4.9 million, or 2.99 cents, a year earlier, it said in a statement. That included a $19.6 million impairment charge on its IT system after a review found "our current systems pose limitations to our high-performance ambitions," chairman Michael Stiassny said.
On an underlying basis, earnings dropped 57 per cent to $7.6 million in the half with gross written premium flat at $146.2 million, which Stiassny said reflected higher claims and static premiums. Tower's claims ratio rose to 52.1 percent from 44.5 per cent a year earlier, and its expense ratio was up to 42.2 per cent from 40.9 per cent.
The shares fell as low as $1.64, and were recently down 6.8 percent to $1.64, slicing $20.2 million from the value of the company.
"The market wants to see some underlying growth in Tower's activity," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "People are just a little bit cautious that Tower doesn't have the scale any longer to compete effectively against other insurers."
Tower plans to simplify its IT infrastructure that currently operates on multiple platforms, which it said are "difficult for our service people to navigate" and "lack flexibility to price at a granular level or change products and pricing with ease." The insurer is investigating its options to increase productivity, cut costs and improve customer experience, and won't renew its on-market share buyback as it invests in a new IT system.
