Thursday 1st March 2018
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Tower's board plans to reinstate dividend payments after a two-year freeze, having largely laid its Canterbury issues to bed with yesterday's settlement and last year's capital raise leaving the insurer well capitalised.
The Auckland-based company suspended dividend payments in 2016 after raising provisions from the 2010 and 2011 Canterbury earthquakes and setting up plans to carve out the remaining claims into a separate entity. That plan was scuttled after a takeover tussle which fell through on opposition from the Commerce Commission, and Tower has since raised $70.8 million and settled a dispute with reinsurer Peak Re.
The board was reviewing that dividend suspension with a view to resuming payments in the 2018 financial year, and chair Michael Stiassny today confirmed it will do so.
"In FY16, we made the prudent decision to suspend payment of dividends as we grappled with the effects of the Canterbury Earthquake legacy," Stiassny said in speech notes to today's annual meeting in Auckland. "This was only ever intended to be a short-term measure. We are pleased to advise the board intends to recommence dividends at the 2018 full year, subject to financial performance."
Tower released a trading update before the annual meeting, showing policy numbers rose by more than 5,000 in the four months ended Jan. 31 and gross written premium climbed 14 percent. The insurer estimates net profit will be reduced by as much as $7 million from a series of storms, including Cyclone Gita in the Pacific, and won't have exhausted its non-catastrophe reinsurance, while the settlement with reinsurer Peak Re will trim earnings by $15.2 million.
The shares climbed as high as 74 cents before the annual meeting, and were recently up 3.7 percent at 70.5 cents, adding to yesterday's 1.5 percent gain.
"The board remains focused on maximising shareholder value," Stiassny said. "Shares are currently trading at around 69 cents and the Tower board still feel that the legacy of Canterbury continues to unfairly weigh on the share price."
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