TOWER delivers strong underlying earnings

Tuesday, 26 May 2015, 10:23 am
Press Release: Tower Insurance

TOWER delivers strong underlying earnings and confirms capital management

TOWER has today reported a 36.4% increase in general insurance underlying net profit after tax (NPAT) to $17.9 million for the six months ended 31 March 2015.

TOWER’s reported net loss after tax of $4.9 million was impacted by the increased provisions of $22.6 million after tax for costs associated with the Canterbury earthquake events.

Highlights from HY2015 include:

• Gross Written Premium of $145.9 million, up 4.9% vs the prior corresponding period (pcp)
• Underlying General Insurance NPAT of $17.9 million, up 36.4% vs pcp
• Strong performance from the Pacific operations – 86.9% growth in underlying NPAT
• Industry-leading Canterbury progress with 94% of claims settled and closed
• Underlying EPS of 10.0 cents per share (cps), up 103% vs pcp
• Half year dividend 8.5 cps unimputed, up 30.8% vs pcp
• Confirmed on market buy back of up to $34 million

TOWER Chairman Michael Stiassny said the positive underlying results reflected the industry backdrop of rising premiums and fewer large claims events, as well as the benefits of the company’s strategy, which seeks to make TOWER the leading light in New Zealand and Pacific general insurance.

“Rising premiums, stabilising reinsurance costs, favourable weather, Pacific policy growth and prudent capital management have supported underlying shareholder returns,” he said.

Mr Stiassny said that sound capital management remained a priority for the TOWER Board.

“We are pleased to confirm today our intention to implement an on market share buyback of up to $34 million, or up to 10% of TOWER’s issued capital, to commence shortly.”

Mr Stiassny said that, in line with TOWER’s policy of paying 90-100% of underlying NPAT in dividends, the Board was pleased to announce a half-year dividend of 8.5 cents per share unimputed, an increase of 30.8% on the prior corresponding period.

TOWER Chief Executive Officer David Hancock said that the company had made significant progress implementing its growth strategy in New Zealand and the Pacific during the half year.

“We are very pleased with the improvement in our underlying general insurance profit over the past six months. This reflects an unwavering focus on our three key strategic pillars of financial performance, customer satisfaction and staff engagement, which are critical to TOWER’s ongoing success.”

“We have been busy implementing our growth strategy: transforming our customer interactions to drive revenue and efficiency, building our digital capability to take us into new distribution channels and increasing our very strong position in the Pacific Rim,” he said.

Mr Hancock said that expanding TOWER’s portfolio of alliance partners also remained a priority.

“Alliances are an important part of TOWER’s growth strategy and a key source of revenue. Consequently we were very pleased to announce in December that an agreement had been signed which will see TOWER become Trade Me’s insurance partner,” he said.

The Pacific Rim business enjoyed strong earnings growth following the devastation of Cyclone Evan in the previous year, with policy numbers increasing 7.7% compared to the prior corresponding period. The Pacific Rim business represents more than a quarter of TOWER revenues and earnings and offers attractive growth opportunities.

“We are currently preparing to enter the Vanuatu market, which offers a great growth opportunity aligned to our core competencies and experience in the Pacific Rim,” Mr Hancock said.

During the half, TOWER made further progress on the Canterbury rebuild, reaching 94% of all claims settled and closed for customers as at 30 April 2015, up from 81% at 31 March 2014. While pleasing progress in claims continues, TOWER has taken the prudent decision to increase provisions following the receipt of the latest actuarial review of projected claims costs.

Mr Hancock said TOWER remained a very well capitalised business and was carrying $51 million in capital above regulatory minimum solvency requirements and a further $63m of cash at the corporate level. Capital management would remain a key component of TOWER’s approach to shareholder value.

Shareholder value is being driven by a number of key areas:

• Growing gross written premiums, improved customer service and cost control in New Zealand;
• Policy growth in existing and new Pacific markets;
• Enhancing TOWER’s operating platform and digital capabilities;
• Exceeding 95% completion on the Canterbury rebuild by the end of 2015; and
• Maintaining strong solvency, paying healthy dividends and where possible returning surplus capital to shareholders.

A disclosure document for the on market share buy back will be sent to all shareholders shortly, ahead of the buy back commencing.

The half-year dividend will be paid on Tuesday 30 June 2015 to shareholders on the register on Friday 12 June 2015.

ENDS

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