Tower posts loss on quake costs, hikes dividend

BusinessDesk

23 Nov, 2015 09:10 PM3 mins to read

Tower estimates the Canterbury quakes attracted gross claims totalling $792 million, of which $206.8 million was still outstanding at September 30. Photo / NZME.

Tower, the general insurer, posted an annual loss as it prepares for more expensive claims from the Canterbury spate of earthquakes, but raised its dividend payout to reflect a stronger underlying earnings performance.

The Auckland-based company reported an annual loss of $7 million in the 12 months ended September 30, compared to a profit of $23.6 million a year earlier, it said in a statement, confirming guidance it gave last week.

That was largely due to a $36.2 million charge from increased provisioning on its remaining Canterbury earthquake claims, which exhausted the reinsurance cover the company took out in April.

Tower estimates the Canterbury quakes attracted gross claims totalling $792 million, of which $206.8 million was still outstanding at September 30. After reinsurance recoveries and other receivables, the insurer estimates net outstanding claims from the quakes to be $46.2 million.

Stripping out the impact of the quakes, underlying earnings climbed 30 per cent to $28.2 million, on a 6.4 per cent increase in revenue to $322.4 million. The board declared a final dividend of 7.5 cents per share payable on February 3, with a January 20 record date. That takes the annual payout to 16 cents, a 10 per cent increase from a year earlier.

"Despite the increased provisions for Canterbury claims cost, our underlying results were very good and reflect the potential of the general insurance business," chairman Michael Stiassny said. "We hold considerable capital and will be continuing with our on-market buyback and current dividend policy."

The company will continue its $34 million share buyback, of which it's bought $12 million of stock.

Despite the increased provisions for Canterbury claims cost, our underlying results were very good and reflect the potential of the general insurance business. We hold considerable capital and will be continuing with our on-market buyback and current dividend policy.
Tower chairman chairman Michael Stiassny

Tower didn't provide guidance for the 2016 financial year.

Gross written premiums rose 2.7 per cent to $305.6 million in the year, while the company's claims ratio declined to 47.7 per cent from 50.8 per cent, reflecting fewer large claims.

The company's Pacific business, which spans Papua New Guinea, Fiji, Samoa, American Samoa, Tonga, the Cook Islands, Solomon Islands and Vanuatu, grew revenue 21 per cent to $46.9 million for a 17 per cent gain in profit to $9.6 million. Its New Zealand operations generated a 1.6 per cent increase in revenue to $216.8 million, for a loss of $19.2 million due to the Canterbury quake costs.

Tower's investment income increased 3.5 per cent to $14.7 million, with the bulk of its $213.6 million investment portfolio in fixed-interest securities.