“It’s been bloody good,” Tower Insurance Chairman Michael Stiassny told analysts on the insurer’s results call on Thursday.
Tower Insurance has had a record year, although the results didn't come come as a complete surprise due to the listed insurer updating the market with high earnings guidance no fewer than five times throughout 2024.
It has bounced back from the big weather events of 2023 that ate into Tower's profits last year, and the insurer is now planning to target annual premium growth of between 10% to 15% through to 2027.
The insurer reported $83.5 million in underlying net profit after tax (NPAT) during the September year, up from $7.6 million last year.
It also made $595 million in its 2024 financial year, up 15% from the $527 million in gross written premiums (GWP) reported in the 2023-year. GWP is the total amount of premiums collected.
A record
Chief Executive Blair Turnbull told interest.co.nz that the insurer’s 2024 financial results were a record one – with a big caveat.
“We’re really looking at it from the latest chapter,” he said.
“This is a really good result. It came off a very tough year, we were coming off record weather events, high levels of inflation, high levels of crime, a reported loss. And so we have bounced back really well. We’re fit, we’re lean, and we're excited about what the journey looks like as we look forward.”
Tower’s Chief Financial Officer Paul Johnston said “relatively unexpectedly” benign weather had been a contributor to the insurer’s full-year guidance being updated five times.
More than half the insurer’s NPAT in the 2024-year came from its large events allowance of $45 million, which went unused due to the lack of natural disasters. The unused allowance increased underlying NPAT by $32 million after tax.
“And I guess there was some flattening of inflation in some of the core supply chain areas that weren’t really expected to be quite as quick. So building and motor supply chains, actually, inflation in those areas fell out a lot faster than the rest of inflation across the rest of the economy,” Johnston said.
Customers who couldn't afford insurance anymore
Despite the bounce in profits, Tower lost 6,000 customers in the 2024-year. Turnbull said the 6,000 were made up of a combination of people who couldn’t afford insurance anymore, and those who moved to another insurance provider.
“We definitely saw in the past year a number of people sold those second cars and that was a big reason for a number of cancellations,” he said.
“But we also took some decisive action to increase prices on motor vehicles, particularly motor only vehicles where there were higher loss ratios, and unfortunately those vehicles were prone to things like ram raids and being stolen and were being targeted through some of the real unfortunate theft activity.”
Tower’s motor premiums grew by 13% over the 12 months to September 2024.
“We expect to see growth in customer numbers in FY25 [the September 2025 year] as we target higher quality risks enabled in part by a risk based pricing capability to target customers with lower risks,” Turnbull told analysts in Tower’s results call on Thursday.
This will involve turning the focus to house insurance. Tower’s GWP from house insurance policies grew by 18% in the September year.
“The aim for us is to be able to continue to grow the business in a very targeted way and using premiums, lower premiums to go after lower risk customers,” Johnston told interest.co.nz.
Turnbull said in the results release that Tower recognised the impact of premium increases for customers and expected premium increases to stabilise further as inflation eases.
However, Tower’s results presentation shows it's targeting annual underlying GWP growth of between 10% to 15% up until the 2027 financial year.
Interest.co.nz asked when Tower was likely to hit $1 billion in annual premiums, now the insurer is well and truly past the halfway point with its $595 million in premiums this year.
“Look, our target is not so much growth for the sake of growth. It is around very targeted risk based growth,” Johnston said.
“Our target is much more around growing shareholder value and growing our equity.”
Tower's full year guidance for the 2025 year is for underlying NPAT to fall between $50 million and $60 million.
This assumes full utilisation of a large events allowance which has been “prudently” set at $50 million – $5 million higher than the large events allowance in the September 2024 year.
The new CEO?
Turnbull is finishing up at Tower in February. By the time Turnbull leaves – the same day as the insurer’s annual general meeting next year – he’ll have spent four and a half years as Tower’s CEO.
He hasn’t publicly announced what his next plans are apart from a running race around Mt Kilimanjaro. But he told interest.co.nz that his loyalty to Tower means he’s unlikely to be seen at another NZ general insurer.
“But you know, I can't retire just yet. I will find something to do, I think my wife and kids will get sick of me very quickly. So I'll pop up somewhere, but I'm not sure where just yet.”
Johnston, who waxed lyrical about the insurer’s results, evaded all blunt questioning on if he was going to be the next CEO of Tower.
“We'll have to see how things pan out,” he said.
It’s unclear if Tower’s board will announce the new CEO at the insurer’s February AGM and neither Turnbull and Johnston confirmed a date.
“I don't think you can put a timeline on these things,” Johnston said.
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