Tower Insurance is overcoming the impact the 2023 catastrophe events had on its books, thanks to making nearly $300 million in premiums and a higher-than-anticipated underlying net profit after tax in the first half of its financial year.
On Tuesday, the general insurer reported that gross written premium (GWP) jumped by 20% to $291 million in the six-month period, a $46 million rise compared to the same period in 2023.
Gross written premium is the total amount of money customers are required to pay for insurance coverage on policies issued by an insurer.
“This was predominantly driven by prior period rating increases designed to mitigate the impacts of inflation, crime and increased reinsurance costs following the 2023 catastrophe events,” Tower told the market.
Tower’s increase in premiums follows a similar trend that its fellow competitors in the insurance market have reported in their first half results for the 2024 financial year.
In February, IAG New Zealand said its GWP had risen 18.8% in its first-half financial period while Suncorp New Zealand’s GWP was up an even higher 20%, matching Tower's premium growth.
Underlying net profit after tax (NPAT) for the six months to March 31 shot up to $36.6 million, a big jump from a loss of $3.7 million that Tower reported in its first half results last year.
The insurer had previously anticipated its underlying NPAT to be at the upper end or above the $22 million to $27 million range. In mid-April, Tower told the market that its full year underlying net profit after tax (NPAT) was expected to be greater than $35 million.
Tower said on Tuesday that its half-year result for the six months to March 31 “compared favorably” with the $5.1 million loss reported in the same period last year, which had been affected by the Auckland flooding and Cyclone Gabrielle disasters in early 2023.
It’s a sign Tower is starting to shake off the shadow that the catastrophe events cast over the insurance industry’s books last year.
The Insurance Council reported in September 2023 that insurers in NZ had paid out over $2 billion in general claims from damages caused by the Auckland Anniversary Weekend floods and Cyclone Gabrielle last year.
Tower said as of May 27, it had closed 97% of the catastrophe claims from the two events.
Business as usual
Chief executive Blair Turnbull attributed the bounce in its earnings being due to the growth in premiums, and improvements in business-as-usual (BAU) claims and operational and digital efficiencies.
Tower has set a conservative large events allowance of $45 million for the whole 2024 financial year, which remains unused.
The insurer said any unused allowance at the end of the financial year will boost Tower’s underlying NPAT, improving the full-year result.
“The business is well positioned to deliver sustained premium growth through innovating our products and services and improved efficiencies, and ultimately attractive long term shareholder returns,” Turnbull said.
Although premiums and underlying net profit increased, Tower’s customer base fell 1% from 312,000 to 309,000 compared to a year ago.
The insurer said this was “partly due to a tightened risk appetite for high-theft motor vehicle models”.
Tower’s board reported an interim dividend of 3 cents per share.
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