Tower turns around its profit result

South Island flooding was part of Tower's payouts in the six months ended March. Photo by Stephen Jaquiery.
South Island flooding was part of Tower's payouts in the six months ended March. Photo by Stephen Jaquiery.

Increased revenue and reduced claims expenses helped Tower Ltd turn an operating loss last year into a much improved operating profit in the six months ended March.

The insurer reported an operating profit of $15.3 million in the period compared with a loss of $7.5 million in the previous corresponding period.

Revenue was up about 7% to $124.8 million and net claims expenses fell 18% to $69 million.

The reported profit of $13 million was well down on the pcp, which was helped by $51 million last year through the sale of subsidiaries.

The cashflow from operating activities was $10 million in the period compared with a loss of $8 million in the pcp.

Tower chief executive David Hancock said the company had responded to shareholder requests for a cost-effective solution to dispose of small parcels of shares in the company.

It announced yesterday a share cancellation programme offering shareholders with fewer than 200 shares the chance to have Tower cancel them free of brokerage charges.

Craigs Investment Partners broker Chris Timms said the cancellation programme was an opportunity for Tower to clean up its share register and reduce costs by removing the need to send out information to so many small shareholders.

The turnaround profit showed the benefit of Tower returning to its core business, he said.

In January, Tower returned $52.6 million to shareholders through a voluntary share buyback, taking total capital returned to shareholders in the last 13 months to $171.8 million.

In April, Tower repaid $81.8 million in bonds to become debt-free.

Mr Hancock said Tower remained a well-capitalised business and was carrying $43 million in capital above solvency requirements at the business level and an additional $35 million at the corporate level.

In the past six months, the organisation had been engaged in executing its refreshed general insurance strategy.

''We're an old company with a lot of new ideas about how to better deliver to our customers. Customer retention, brand recognition and net promoter score have all improved over the first six months of the year.''

Gross written premiums increased 5% on the pcp, supported by premium growth to reflect earlier rises in reinsurance costs.

Net earned premiums increased 7.7% to $115.6 million.

The result for the first six months was ''particularly pleasing'' given the abnormal weather patterns continuing to affect the local insurance industry, Mr Hancock said.

Large claims events in New Zealand and the Pacific cost $4.8 million before tax compared to $3.3 million in the pcp.

Significant New Zealand events in the first half of the year included floods in the South Island and the impact of Cyclone Lusi.

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