Tower sees higher annual profit, lower gross written premium growth and bemoans ongoing Canterbury earthquake costs

Insurer Tower has upgraded its annual profit guidance, but says gross written premium growth will be lower than previously expected, and is increasing its Canterbury earthquake provision.

In an announcement on Tuesday Tower said its September-year underlying net profit after tax (NPAT) is now expected to be between $70 million and $80 million. That's up from the insurer's previous guidance of between $60 million and $70 million.

"The upward revision of underlying NPAT guidance reflects continued better-than-expected business-as-usual (BAU) claims performance. This is due to an unusually prolonged period of favourable weather, a lower inflationary environment, fewer total loss house claims, and enhanced risk selection," Tower said.

So far in its September 2025 financial year, Tower says it has recorded just one large event, the Dunedin floods in October 2024, which have an estimated cost of about $3 million. However, Tower says it has so far received nearly 250 claims stemming from storms hitting New Zealand over the past week linked to Tropical Cyclone Tam.

"This means this storm may exceed the $2 million threshold for a large event for Tower," the insurer said.

In terms of gross written premiums (GWP), the total amount of insurance premium income Tower earns from its policyholders, guidance is revised to "mid-single digit," from the previous range of between 7% and 12%.

"While Tower continues to see growth in customer numbers in the home insurance portfolio, a reduction in average premiums has contributed to lower-than-expected GWP growth. This reduction is due to a higher proportion of lower risk new house insurance and motor policies, as well as more competitive pricing in the New Zealand market, which benefits consumers," said Tower.

Tower also increased guidance for its management expense ratio, which is a measure of profitability calculated by dividing expenses associated with acquiring, underwriting, and servicing insurance premiums by net premiums earned.

"Guidance for the management expense ratio (MER) is revised to <31% [less than 31%] from the previously advised guidance of <29%. While MER continues to trend downwards, it is currently tracking above target. This results from the reduced GWP flowing through to the ratio and the strategic acceleration of investments aimed at enhancing growth, improving efficiencies and strengthening the business. Tower expects MER to continue to reduce in the medium term as benefits from strategic initiatives are realised. Guidance for the combined operating ratio is now expected to be within a range of 82% to 84%."

Tower's statement also noted it expects an impact to reported profit from "additional non-underlying costs," including "ongoing customer remediation costs" and an increase in its Canterbury earthquake provision.

"This increase is due to an unexpected rise in new over-cap claims received from the Natural Hazards Commission [formerly known as the Earthquake Commission]. Canterbury earthquake costs continue to challenge the insurance industry some 15 years after the events due to the ability to reopen historic claims after an extended period. This situation is compounded by external factors including the significant volume of reopened claims from undiscovered damage and inadequate repairs, and inflation since 2010-2011. Tower will provide further details on its performance at its half-year results announcement on 20 May 2025."

Tower's 2024 annual report placed an assumed value of $5.2 million on future Canterbury earthquake overcap property claims, up from $3.5 million in 2023.