Tower profit triumphs over weather

RICHARD MEADOWS
Last updated 13:12 27/05/2014
Tower

Tower Insurance boss David Hancock says the profit is pleasing given the abnormal weather patterns.

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Slimmed-down insurer Tower has reported a half-year net profit of $13.1 million and announced another small distribution from its substantial war chest.

The NZX-listed general insurer's profit was down 70 per cent, having been boosted in the previous year by the sale of three of its four business arms.

The proceeds of the sales were partially distributed through a share buy-back earlier this year, as well as going towards the repayment of debt.

However, Tower is still carrying an extra $78m in capital above its solvency requirements.

The company announced a half-year dividend of 6.5 cents a share, as well as earmarking roughly $4.5m to buy out more than 20,000 shareholders with fewer than 200 shares.

Small investors will be able to add to their holdings or dispose of their parcels at no cost, while those who do not respond will have their holdings cancelled and paid out automatically.

Chief financial officer Michael Boggs said the company had a commitment to returning capital whenever possible.

He said Tower hoped to provide an update on further distributions later in the year, once the Reserve Bank had assessed its solvency.

Using the money for acquisitions or growth strategies was not out of the question either, Boggs said.

"The board will always look to utilise the capital for the best options at the time," he said

Tower's general insurance arm made a profit of $11.8m, reversing last year's $14.8m loss.

Chief executive David Hancock said he was pleased with the "solid" result, in the face of challenging weather-related incidents during the period.

Large claims relating to the likes of Cyclone Lusi and the floods in the South Island cost $4.8m pre-tax, compared to $3.3m in claims previously.

In the Pacific, normalised net profit recovered to $2.7m despite a cyclone in Tonga and suspected arson in the Cook Islands.

Gross written premium was up 5 per cent and Hancock said the company had managed to increase its prices enough to recover rising reinsurance costs.

The remaining life insurance arm, which is closed to new business, made a $3.7m net profit.

Hancock said Tower was still receiving approaches about its life business and would continue to evaluate them.

Tower has a single-digit market share in New Zealand, and is the only locally listed insurer.

It had previously warned against much larger rival IAG's proposed acquisition of Lumley General Insurance, which the Commerce Commission has since approved.

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