Group managing director Rob Flannagan said that while Tower's reinsurance cover for the February 2011 earthquake had not been fully utilised, continued notification of claims and the application of an appropriate risk margin, together with an inflationary allowance, would take the total claims and provisions over Tower's $325 million cover.
"Since the Christchurch earthquakes, Tower has increased the limits on its reinsurance programme to $500 million per event."
Tower remained well capitalised, at about $475 million of equity, well above regulatory capital requirements.
Mr Flannagan said the impact of the earthquakes continued to involve elements of uncertainty for the company and the board felt it was prudent to be conservative when providing for the amounts that would be paid out to affected policy holders.
While claims had not dented Tower's underlying financial strength, market expectations of Tower's reported profit for the year ended September should be reduced by $9.4 million. Market forecasts were for a net profit of $50.1 million.
Forsyth Barr broker Tom Bliss said the broking firm did have an accumulate recommendation on Tower shares but that might be reviewed.
"The $9.4 million reduction is immaterial, as it's only equivalent to 3.5c per share. But Tower's share price is down 6c or 3.2% at $1.78. The market is spooked by Tower's reinsurance cover being exceeded, in which case Tower bears the cost of any excess above the $325 million allocated currently," he said.
Mr Flannagan said Tower had finished a strategic review that began earlier this year. The review involved a comprehensive evaluation of aspects of the group.
He expected to be able to provide further information next week.
