TWR - Tower Insurance.

[percy]

It's "moving day" as they say at the big golf events, so did you make the cut here?

I moved into a few today,at average cost of 73 cents..

[Lego_Man]

I moved into a few today,at average cost of 73 cents..

Off to the races now...I suspect one of the large brokers is making a move. Forsyth Barr have been bullish for a while.

As usual you never feel like you have enough holding in these breakout situations.

[Sideshow Bob]

I moved into a few today,at average cost of 73 cents..

So did I Percy.

Hopefully we are "well positioned"!!

Trust you were the 4 million that went through??

[Rawz]

So maybe a buyback?

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Thank you for your considered note and for your investment in Tower. We certainly share your aspirations for a strong next couple of years and beyond.

Tower’s Board considers it important to maximise the efficient use of capital and to provide a return on capital to Tower’s shareholders. As such the Board regularly considers Tower’s capital position and, where prudent to do so, the range of options it has available to return any surplus capital back to shareholders. For example, Tower has previously returned capital (via a share buy-back) from an excess solvency position in FY22 and this is an option the board has to redistribute capital to shareholders.

I would also note that capital distributions (via dividends or other means) are subject to our dividend & capital management policies:

• Tower’s policy is to pay a sustainable annual dividend to shareholders that aims to be in the range between 60-80% of “adjusted earnings” (defined as the reported full year Net Profit After Tax (NPAT) plus acquisition amortisation and unusual items) for the Tower consolidated group, where prudent to do so.
• Tower’s capital management policy stipulates the amount of target solvency capital Tower aims to hold above regulatory requirements, and this informs the Board as to how much capital is available for distributing funds back to shareholders.

Tower’s updated solvency position will be shared at our half year results in May.

Regarding imputation credits, we acknowledge that the dividends are currently not imputed due to the tax losses brought forward that offset any current tax payable to IRD so that new imputation credits are not being created. Under the current targets we issued at our ASM, we expect to utilise these tax losses some time in FY26, from which time cash payments of tax will recommence and imputation credits will be available. The Board considers that it is in the interests of shareholders to continue to pay a sustainable annual dividend, even if no imputation credits are available.

Michael Stiassny

thanks for sharing Leemsip.

Sounds like they are keen to pay dividends even without imp credits. all good.

if you take midpoint of their payout range and midpoint of their guidance the dividends will look something like this:

FY24
70% x 0.065 EPS = 0.045 dps or 6% yield

FY25
70% x 0.13 EPS= 0.09 dps or 13% yield

FY26
70% x 0.18 EPS= 0.129 dps or 18% yield

FY24 doesnt include any large event write back (of which we assume none has been used so far this year,, 6.5months through the year) so is very conservative.

[percy]

So did I Percy.

Hopefully we are "well positioned"!!

Trust you were the 4 million that went through??

No not me...lol.

[winner69]

So did I Percy.

Hopefully we are "well positioned"!!

Trust you were the 4 million that went through??

Not ‘well positioned’ ..these days it’s “positioned for a dynamic future."

[bull....]

So maybe a buyback?

-------------------------------------------

Thank you for your considered note and for your investment in Tower. We certainly share your aspirations for a strong next couple of years and beyond.

Tower’s Board considers it important to maximise the efficient use of capital and to provide a return on capital to Tower’s shareholders. As such the Board regularly considers Tower’s capital position and, where prudent to do so, the range of options it has available to return any surplus capital back to shareholders. For example, Tower has previously returned capital (via a share buy-back) from an excess solvency position in FY22 and this is an option the board has to redistribute capital to shareholders.

I would also note that capital distributions (via dividends or other means) are subject to our dividend & capital management policies:

• Tower’s policy is to pay a sustainable annual dividend to shareholders that aims to be in the range between 60-80% of “adjusted earnings” (defined as the reported full year Net Profit After Tax (NPAT) plus acquisition amortisation and unusual items) for the Tower consolidated group, where prudent to do so.
• Tower’s capital management policy stipulates the amount of target solvency capital Tower aims to hold above regulatory requirements, and this informs the Board as to how much capital is available for distributing funds back to shareholders.

Tower’s updated solvency position will be shared at our half year results in May.

Regarding imputation credits, we acknowledge that the dividends are currently not imputed due to the tax losses brought forward that offset any current tax payable to IRD so that new imputation credits are not being created. Under the current targets we issued at our ASM, we expect to utilise these tax losses some time in FY26, from which time cash payments of tax will recommence and imputation credits will be available. The Board considers that it is in the interests of shareholders to continue to pay a sustainable annual dividend, even if no imputation credits are available.

Michael Stiassny

thx leemsip. hopefully share buyback. most efficient form of cap management at these prices i reckon

[Rawz]

thx leemsip. hopefully share buyback. most efficient form of cap management at these prices i reckon

could see both. if the large event allowance isnt used and the balance sheet is comfortably strong over and above the regulatory requirements there could be 'sustainable annual dividend' and capital returned from an 'excess solvency position'

[bull....]

could see both. if the large event allowance isnt used and the balance sheet is comfortably strong over and above the regulatory requirements there could be 'sustainable annual dividend' and capital returned from an 'excess solvency position'

both are probable at the time. tower have history of doing both with excess capital. key is what level they set as there solvency level. this probably tied in with there strategic consulting

[Rawz]

Research Notes - MST Access

This is forbar research. TWR has paid them to put this together. This is money well spent by TWR on behalf of shareholders imo. You can click the link above and see all the free research reports on many a company. pretty cool aye.

Rawz executive summary: TWR cheap as chips.

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Tower (TWR) has experienced a positive reversal of fortunes, with its 1H24 likely including zero large events. The absenceof large events means: (1) TWR is likely to report an exceptionally strong 1H24 result, and (2) there is significant upside riskto FY24 guidance of ‘the upper end or above the NZ$22m–NZ$27m range in underlying NPAT’. TWR's guidance includesNZ$45m of large events allowance, and we estimate none was utilised in 1H24. Accordingly, we adjust our forecasts byreducing our FY24 large events allowance -50%, choosing to be conservative despite large events having historically beenheavily skewed to the 1H. We also reduce our business as usual (BAU) claims ratio to account for premium growth and acontinued normalisation of motor claims, seeing our FY24 underlying profit estimate lift by +84% to NZ$49.2m. TWRtrades at a large discount to its peer group. We view the widening valuation gap as increasingly unjustified, especially giventhe upside risk to FY24 earnings expectations. Our blended spot valuation increases by +22% to NZ$1.41

A stellar 1H24 result likely on 28 May 2024

TWR is likely to report a stellar H24 result on 28 May 2024. We anticipate tailwinds from: (1) the lack of large events in the period, (2)continued strong GWP growth, (3) robust investment returns, (4) a normalisation in claims frequency and severity, and (5) furtherimprovements in the management expense ratio (MER). Assuming a business as usual (BAU) claims ratio of 52.1% and MER of 29.6%,we forecast underlying NPAT of NZ$35.1m. While not included in our forecasts, the strong 1H24 result may allow sufficient capitalrecovery for TWR to declare an interim dividend.

Benign weather boosts FY24

We estimate that TWR experienced no large events in the 1H24 period that ended on 31 March 2024. Given this fortunate position,we expect TWR to provide an update regarding its large events allowance for FY24 at its 1H24 result or earlier. A partial unwind ofthe allowance is a near certainty, especially in the context of ~81% of TWR's large events costs occurring in 1H periods since FY18,and the worst 2H large events expense since FY18 being only NZ$4.6m. Nevertheless, we expect TWR to be conservative and retain asignificant allowance. Reflecting this, we reduce our FY24 large events allowance -50% to NZ$22.5m.

Valuation support increasing

TWR trades at just 5.2x 12-month forward underlying earnings on our updated estimates, offering substantial upside to peers IAG on16.3x and SUN on ~15.1x. Over the last seven years TWR has traded on an average 12-month forward PE of 9.4x and at an averagediscount to its peers of -37%, meaning TWR trades below its historical valuation ranges. We find this difficult to reconcile given TWR'simproving business fundamentals, with increased scale driving improved efficiency and returns