Monday 17th May 2021
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Tower Limited has today revised its guidance on underlying profit for the 2021 financial year.
The company now expects underlying net profit after tax (NPAT) of $25 million to $27 million for the year ended 30 September 2021. The previously announced guidance was for underlying NPAT of greater than $29.8 million.
In addition to higher frequency of house claims, this revision reflects emerging industry trends relating to inflationary pressures on building costs. Growth in Gross Written Premium (GWP) is forecast to be 5% or greater, despite declining GWP in the Pacific business due to Covid-19. Tower also expects continuing improvement in its management expense ratio.
Higher claims costs are largely being driven by an increased frequency of large house claims (claims totalling more than $50,000), with Tower accepting 52 large house claims totalling $9m in the first half. This compares to 26 large house claims worth $4.9m in the corresponding period of FY20. Tower has also noted emerging house claims inflation across the portfolio.
The low interest rate environment is impacting investment income, with $0.6m income in the first half of 2021 compared with $2.2m in the corresponding period of 2020. Tower remains committed to its dividend policy of paying 60% to 80% of cash earnings where it is prudent to do so. Accordingly, the Board anticipates declaring an interim dividend of 2.5 cents per share next week.
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