Tower posts loss on ballooning quake costs, hikes dividend as underlying earnings improve

Tuesday 24th November 2015

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 Sept. 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 Sept. 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 percent to $28.2 million, on a 6.4 percent increase in revenue to $322.4 million. The board declared a final dividend of 7.5 cents per share payable on Feb. 3, with a Jan. 20 record date. That takes the annual payout to 16 cents, a 10 percent 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.

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

Gross written premiums rose 2.7 percent to $305.6 million in the year, while the company's claims ratio declined to 47.7 percent from 50.8 percent, 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 percent to $46.9 million for a 17 percent gain in profit to $9.6 million. Its New Zealand operations generated a 1.6 percent 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 percent to $14.7 million, with the bulk of its $213.6 million investment portfolio in fixed-interest securities.

The shares last traded at $1.97 and have dropped 8.4 percent this year.

BusinessDesk.co.nz

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