TWR - Tower Insurance.

[trader_jackson]

5 directors have brought over 600k of shares in the past week ish... certainly can't be a bad thing
I have a strong feeling dividends will shortly be back on the table

[850man]

Up 4.3% today, haven't seen that in a very long time

[winner69]

This is a good initiative

Hopefully get rid of some the dodgy drivers off their books ...or make them pay more

Stuff the do gooders ...businesses must make money

https://www.rnz.co.nz/news/business/432787/insurer-s-driving-app-a-form-of-surveillance-law-professor

[Jaa]

This is a good initiative

Hopefully get rid of some the dodgy drivers off their books ...or make them pay more

Stuff the do gooders ...businesses must make money

https://www.rnz.co.nz/news/business/432787/insurer-s-driving-app-a-form-of-surveillance-law-professor

Why the negative energy towards Tower Winner? This also makes the roads safer over time.

It isn't even new, Tower has had a similar app for a few years, they have just upgraded it.

Apple, Google and Facebook have similar data. At least Tower are governed under NZ law so if we collectively decide this kind of surveillance is not for our society, it can be outlawed.

[Scrunch]

So SALT's been selling more shares.
https://www.nzx.com/announcements/364579

Between the 2nd and 15th they have sold another 4.5m. Over this period 11.1m sold on the NZX, so SALT contributed about 40% of the sale side volume over the last couple of weeks. Despite this, TWR has gone from 62c on the 1st Dec to 73c on the 15th Dec (72c today). Pretty good going to have an increasing price as someone is actively selling down.

This points towards further upside when SALT stops selling.

[tim23]

So SALT's been selling more shares.
https://www.nzx.com/announcements/364579

Between the 2nd and 15th they have sold another 4.5m. Over this period 11.1m sold on the NZX, so SALT contributed about 40% of the sale side volume over the last couple of weeks. Despite this, TWR has gone from 62c on the 1st Dec to 73c on the 15th Dec (72c today). Pretty good going to have an increasing price as someone is actively selling down.

This points towards further upside when SALT stops selling.

So who is buying?

[Southern Lad]

The category 5 Cyclone Yasa currently heading for Fiji presumably has the potential to add the the high claim rate suffered since 30 September:

https://www.abc.net.au/news/2020-12-16/fiji-brace-category-5-tropical-cyclone-yasa-bainimarama/12988514

For the sake of all Fijians and TWR shareholders, here’s hoping it changes course before it is due to hit later Thursday.

[Scrunch]

So who is buying?

The general wider investing public? I'm sure some of that buying would be people following the buying of insiders.

[Dassets]

Basically Salt was running money for AMP. AMP has decided to be passive so Salt has to reduce. Same in NWF and, in part why there is so much stock coming out. Actually including all the other stock. A bit of a normal occurrence

[ados_nz]

https://www.stuff.co.nz/world/south-pacific/300187395/cyclone-yasa-fijis-vanua-levu-pummelled-overnight

[Poet]

I guess this isn't anything particularly unexpected for Tower, cyclones happen regularly.
95% of Fiji houses don't have cyclone cover and those that do are required (By Tower, at least) to have an engineer's certificate as to the appropriate construction. Also requires home owners to have cyclone shutters fitted and closed during the currency of storm warnings.

Tower also doesn't appear to cover damage from storm surges or flooding associated with cyclone even when house is insured

Nothing complements a home like security and peace of mind. A strong house is a safe house that will protect your property, your possessions but most importantly, your family. No matter the weather, homes should be built to last and endure any season.

In Fiji, where the last cyclone season saw eight pass through the region, a house that can withstand damaging conditions is necessary and worth the investment.
For your home to be rated cyclone-certified it needs an engineer certificate stating the house can withstand cyclones.
This requires that your home’s structural design and build is in accordance to wind load standards, and only then can your home be accordingly cyclone-certified and insured.
Such building standards significantly reduce the effects of cyclones. With Cyclone Winston, we saw a vast difference in the damage experienced in homes that were built to this standard compared to those that weren’t.
It’s important for home owners to understand that cyclone-certified houses are safer.
They are not just a channel for house insurance, but will firstly serve their purpose of protecting your family and property, your most important assets.
Therefore, it is a crucial investment to have your property built to standards that will protect them.
At a rare Category-5 rating, Tropical Cyclone Winston destroyed homes that were cyclone-certified. Home owners who invested in cyclone cover with TOWER Insurance were financially cushioned.
Insurance provides additional peace of mind to those who build their treasured homes to a standard that can withstand cyclones.

No doubt there will be costs, and Tower will advise shareholders in due course, I'm not expecting the costs to be all that significant (I could be wrong though)

GLTAH

[winner69]

Harold in April this year seemed to have an adverse impact on Towers financials (v forecast)

No idea whether this is a similar event

[nztx]

Has the Head Honcho contingent's apetite at TWR's board table run out of buying puff ? ;)

or perhaps just gone on holiday early to mull over whether Fiji's weather systems will come this way ? ;)

[Scrunch]

Has the Head Honcho contingent's apetite at TWR's board table run out of buying puff ? ;)

Not sure, but given what's happening over at ATM where the insiders were selling a few months ago, I'm pleased to see multiple insiders buying at TWR.

[Balance]

https://www.rnz.co.nz/news/national/433660/some-motueka-fruit-growers-lose-entire-crop-in-hailstorm

https://www.newstalkzb.co.nz/on-air/holiday-breakfast/audio/evan-heywood-fruit-growers-in-motueka-in-despair-after-devastating-hailstorm/

Another month, another weather event for the insurance industry.

"A fruit growers association in Motueka in the Nelson area says yesterday's hail storm may have wiped out so much fruit the labour crisis is somewhat averted.

The association's president says some growers lost their entire crop in the storm.

Richard Clarkson says it will cost "millions of dollars", and the district and entire country would feel the impact."

[Antipodean]

In generalities... yes more weather events reported, and yet, general insurance seems to be profitable year after year.
Even in NZ where our insurance companies have spent decades being taken over... must be some value in that?

In specificities... I'm not certain Tower has a high percentage of the Motueka fruit growing industry business assets/interruption coverage. Also "millions of dollars" sounds bad... but I suspect Mr Clarkson may be referring to the full economic impact of the lost product. Including sales, employment, rates, costs, knock on effects with other companies etc. Business cover terms and conditions will vary, however unlikely this is all is covered by whomever is insuring said growers.

Most product systems can identify and track weather related events if the company wants to, compare local to international data sets and decide if long term premium rates need to be adjusted in a global or more targeted way.
If identified, can be handled.

Still a question mark hanging over impact of recent Pacific storm, probably more important in my mind to keep an eye on. More of a concrete relationship to Tower's bottom line.
That being said, for disclosure I'm accumulating as the long term story here is appealing to me.

[nztx]

All sorts of interesting things to play out in TWR's next period reporting now (for more excuses ?) ;)

- Fiji Storm
- Napier Flooding
- Motueka Hail & Storm

Anyone care to bet on how well what many may have hoped looked like sniff of a small dividend
will be well sliced & diced up now on extraordinarily ordinary events .. ? ;)

[Southern Lad]

I’m not aware that TWR are big in the crop insurance space but assume they will have some exposure to property and motor vehicle damage caused by the hail storms. Hail damage to motor vehicles can be big claim events in the insurance industry. Based on my capital solvency comments below, I don’t think these events will have a significant impact on any decision to pay a dividend in FY21.

TWR undertook a capital raise in late 2019 because the RBNZ refused to allow the disputed EQC receivable to be taken into account for solvency capital purposes. With the claim now settled (albeit for 76% of the carrying amount in the financial statements), my assumption is that this settlement (and profits earned since 2019) means that TWR now has excess solvency capital which leaves it well placed to grow its book (organically or inorganically) or to return surplus capital to shareholders.

My my preference is that TWR has opportunities to invest the capital profitably and grow the business. If those opportunities aren’t available, the capital should be returned to shareholders. The 2020 annual report indicates that TWR has only $271,000 of imputation credits and tax losses that result in a deferred tax asset of $25.7m (if all in NZ this would amount to gross tax losses of approximately $91.8m), so TWR won’t be paying any tax in NZ for quite a few years and therefore won’t be in a position to impute dividends. Surplus capital should therefore be used to undertake an on-market share repurchase or a pro-rata share cancellation (if the applicable tax thresholds can be met). Unimputed dividends are not shareholder friendly!

[winner69]

Director Wendy buys 10,000 more shares

Must be confident no big claims from weather events over the weekend

[KJMLimited]

I'm sure your comment is tongue in cheek, however it's not as if she bought them today.

[trader_jackson]

TWR would have to be one of the most undervalued, or perhaps the most undervalued stock on the NZX right now... then again, that isn't saying much as many stocks are either ridiculously overvalued or at least overvalued.
There have been significant director purchases recently (something not really happening on any other NZX stocks) and that can only be good one would think.

[winner69]

I'm sure your comment is tongue in cheek, however it's not as if she bought them today.

Bought some yesterday though

[KJMLimited]

TWR would have to be one of the most undervalued, or perhaps the most undervalued stock on the NZX right now... then again, that isn't saying much as many stocks are either ridiculously overvalued or at least overvalued.
There have been significant director purchases recently (something not really happening on any other NZX stocks) and that can only be good one would think.
I agree. Insider purchases and sales are the best guide to prospects. They are far more important than any valuation technique. No one, even Directors, will buy if they think they are going to lose money.

[KJMLimited]

Bought some yesterday though I think those dates are settlement dates - given the market wasn't open yesterday. Unless she bought them on the AU market yesterday. I'm happy to stand corrected.

[Balance]

I agree. Insider purchases and sales are the best guide to prospects. They are far more important than any valuation technique. No one, even Directors, will buy if they think they are going to lose money.

Chairman has been buying and buying over the last few years - first significant purchase being in 2017.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/311986/271844.pdf

Hopefully his faith will be rewarded along with those who follow him into Tower shares.

[Balance]

Director Wendy buys 10,000 more shares

Must be confident no big claims from weather events over the weekend

Whole insurance sector grappling with adverse weather events - used to be 'abnormals & one-offs' but these days, normal occurrences.

Premiums really need to rise and keep rising for the industry to reflect new normal?

[JohnnyTheHorse]

Whole insurance sector grappling with adverse weather events - used to be 'abnormals & one-offs' but these days, normal occurrences.

Premiums really need to rise and keep rising for the industry to reflect new normal?

Agree with what you're saying. I think with things going digital risk premiums are going to become far more accurate and go upwards. Most people have probably already seen this already with their own insurance.

With Bain holding ~20% I see this mainly as a takeover play. They are surely shopping it around.

[Balance]

https://www.newstalkzb.co.nz/news/national/central-otago-cherry-crops-ruined-by-rain/

Losses could be as high as $50m and more if the rain does not stop.

This covered by insurance?

[winner69]

Interesting article

What Lies Beyond Digital for Insurance Operations?



https://www.bcg.com/publications/2020/bionic-insurance-could-be-the-future-of-insurance

[JohnnyTheHorse]

Another 1.4 million shares crossed at 72.5 yesterday so looks like the accumulator is back. Watching for another leg up with a break of 73.5.

[Antipodean]

https://www.newstalkzb.co.nz/news/national/central-otago-cherry-crops-ruined-by-rain/

Losses could be as high as $50m and more if the rain does not stop.

This covered by insurance?

Depends on the wording on the insurance contract.

Typically, replacement of contents style policies cover 'unforeseen events.' Is heavy rain really fitting into this category?
More business interruption style policies also rely on an underlying event that triggers it (eg EQ closes CBD).


I note in less than 2 months (since 26/11/2020), 5 directors and the new CEO have bought on market.

[nztx]

Depends on the wording on the insurance contract.

Typically, replacement of contents style policies cover 'unforeseen events.' Is heavy rain really fitting into this category?
More business interruption style policies also rely on an underlying event that triggers it (eg EQ closes CBD).


I note in less than 2 months (since 26/11/2020), 5 directors and the new CEO have bought on market.


perhaps they tuned into the wrong set of weather gods ? ;)

[KJMLimited]

AGM on Tuesday next week..

[KJMLimited]

Umm sorry I misread the notice. 23 Feb not Jan. I got far too excited about an insurance company AGM.

[Sideshow Bob]

Tower to acquire ANZ legacy portfolio

22/2/2021, 2:07 pmTRANSACTMarket Information
NZX Limited
Level 1, NZX Centre
11 Cable Street
Wellington
New Zealand
Company Announcements Office
ASX Limited
Exchange Centre
Level 6, 20 Bridge Street
Sydney NSW 2000
Australia

22 February 2021

Tower to acquire ANZ legacy portfolio

Kiwi insurer Tower (NZX/ASX: TWR) announced it has agreed to pay $14m in cash to ANZ to acquire and assume ANZ’s rights and obligations relating to servicing a portfolio of insurance underwritten by Tower. This transaction enables this portfolio to be brought into the Tower Direct business.

Tower provided insurance for ANZ and National Bank customers between 1990 and 2009 and continues to cover over 23,000 people under those policies. On completion of the acquisition these customers will be insured directly by Tower under a Tower branded policy. These customers have always been insured by Tower under these policies and that is not changing as a result of this acquisition. No steps need to be taken by existing customers.

Blair Turnbull, Tower CEO, says the deal delivers positive value for Tower and its shareholders by ending all future ANZ commission payments on the portfolio. Premiums from the ANZ portfolio contributed $40m in FY20 to Tower’s Gross Written Premium. The agreement also enables the migration of these customers to Tower’s leading cloud-based, digital platform which delivers operational efficiencies for the company and offers customers a more expansive and modern product range.
“We have a tried and true method to migrate customers from legacy platforms and products to our new technology, which improves the customer experience and delivers scale efficiencies. We adopted this successful acquisition strategy with Youi NZ, Club Marine and now ANZ,” said Turnbull.

Turnbull says that the acquisition means these customers will now have access to Tower’s leading digital and data technology that provides simple and rewarding experiences for customers. We will be deepening our relationships with these customers, with increased engagement and access to modern and innovative new products, as well as enabling them to go online to understand and manage all aspects of their insurance.

“We have a clear strategy to grow our business and this agreement continues to solidify our position in the market as a strong and innovative local insurer that is here for our customers,” said Turnbull.

“Our Partnership with ANZ has been a positive one over many years. As we look forward, we are excited to welcome these customers to Tower direct product range and to continue providing a leading customer experience,” said Turnbull.

No regulatory approvals are required to proceed under the agreement and the acquisition is unconditional, with completion expected to take place on 12 March 2021.
ENDS

[nztx]

Boys & Girls - was that your dividend that just disappeared out the door ? ;)

TWR holders what remains of them appear to be a patient crew, perhaps too much so
when it comes to swallowing a trail of excuses on why no Divvie .. not even a smell
of one for long periods .. ;)

[Filthy]

Boys & Girls - was that your dividend that just disappeared out the door ? ;)

who needs dividends when you have a share price that is going up? oh. wait.

on the bright side, hopefully it means more growth eh. that will be good.

[nztx]

who needs dividends when you have a share price that is going up? oh. wait.

on the bright side, hopefully it means more growth eh. that will be good.


Probably growth in the next Cap Raise .. 1:5 may have just become 1:3 .. of course at the elevated rate ;)

Any eager starters ? ;)

Div next month - Nah .. Next HY - Nah Not Really .. Next year - what's the next acquisition instead to avoid the issue ? ;)

[Filthy]

Next year - what's the next acquisition instead to avoid the issue ? ;)

maybe TradeMe insurance; isn't that underwritten as well? haha

[Antipodean]

$40m gwp, that has an average trailing commission of say, (guessing) 10%, at that would be $4m / year not heading out the door. Not to mention the new ability to cross sell / maintain in house. So long term this is a good move by Tower. Sure, agreed that this means the FY21 dividend looking less likely.

This will be the 4th insurance book (Tower legacy, Youi, Marine) migrated into their new platform in a short timeframe which does infer some longer term decent growth, and scalability in the company based on the IT capex all being completed.

[Jaa]

Antipodean that may be about right but it ignores the clear risk to the book.

ANZ now has every incentive to get their customers to switch to their current insurance partners (https://www.anz.co.nz/personal/insurance/), Vero. So expect the $40m to decrease over time.

Worth it, if it lets them turn off their old IT systems. Otherwise, maybe a forced purchase by Tower?

[Antipodean]

maybe TradeMe insurance; isn't that underwritten as well? haha

Trademe insurance is already underwritten by Tower :)


Antipodean that may be about right but it ignores the clear risk to the book.

ANZ now has every incentive to get their customers to switch to their current insurance partners (https://www.anz.co.nz/personal/insurance/), Vero. So expect the $40m to decrease over time.

Yes ANZ have full incentive to move that book now, assuming there isn't anything in the purchase agreement that either forbids it, restricts it, or changes the price depending on the book volume at March 12. In any case if these policies have been around since 2009, I can't imagine a flood of them will move in the next two and a half weeks.

[nztx]

Antipodean that may be about right but it ignores the clear risk to the book.

ANZ now has every incentive to get their customers to switch to their current insurance partners (https://www.anz.co.nz/personal/insurance/), Vero. So expect the $40m to decrease over time.

Worth it, if it lets them turn off their old IT systems. Otherwise, maybe a forced purchase by Tower?


Buy ANZ instead you reckon ? ;)

[Poet]

Antipodean that may be about right but it ignores the clear risk to the book.

ANZ now has every incentive to get their customers to switch to their current insurance partners (https://www.anz.co.nz/personal/insurance/), Vero. So expect the $40m to decrease over time.

Worth it, if it lets them turn off their old IT systems. Otherwise, maybe a forced purchase by Tower?

It would be standard commercial practice to write a non-compete clause into a deal like this. Those customers will be forever barred to ANZ

[Jaa]

It would be standard commercial practice to write a non-compete clause into a deal like this. Those customers will be forever barred to ANZ

Your dreaming. The customer is always free to decide and your friendly local bank teller will always be incentivised to offer you a new better deal. Churn is as old as insurance.

[Poet]

Your dreaming. The customer is always free to decide and your friendly local bank teller will always be incentivised to offer you a new better deal. Churn is as old as insurance.
A bank teller? Jeez, haven't seen one of those for many years - do they still exist?
The only way ANZ would be marketing to these customers would be on-line, and I'm thinking that will be prohibited in the deal

[JohnnyTheHorse]

This does point to no dividends being paid within at least the next half year. However that money isn't 'lost', it will just appear in the capitalisation of the stock over time due to increased future profits. The board and management have recently purchased materially large positions in the stock. They believe using profits for acquisitions is the best use of funding rather than paying out dividends (which will be taxed) at this stage.

I agree with them. They have finished heavy investment into their digital platform which will create large efficiencies. They are now in a position to scale the business with little extra admin cost. I still see the end game of Bain Capital being a sale of the business. The larger they can grow their loan books the more attractive they become to large overseas players who want a meaningful position in the NZ and the Pacific.

[Southern Lad]

This does point to no dividends being paid within at least the next half year.

TWR did a capital raise in September 2019 in large part because the RBNZ wouldn't count the then disputed EQC receivable for capital adequacy purposes. With that position now resolved (albeit for an amount less than sought), TWR will have excess capital that it may have difficulty returning to shareholders tax effectively due to an absence of any imputation credits. I therefore favour investing the excess capital to grow the business.

The ability of insurers to pay dividends continues to be under RBNZ surveillance due to COVID concerns on liquidity. Assuming TWR has a more than adequate capital position, small unimputed dividends hopefully won't be far off.

[ados_nz]

Boys & Girls - was that your dividend that just disappeared out the door ? ;)

TWR holders what remains of them appear to be a patient crew, perhaps too much so
when it comes to swallowing a trail of excuses on why no Divvie .. not even a smell
of one for long periods .. ;)

Apparently not..... https://www.nzx.com/announcements/367996

"Tower’s consistent growth supports return to dividends"

[Scrunch]

Apparently not..... https://www.nzx.com/announcements/367996

"Tower’s consistent growth supports return to dividends"


And an intention that the half year dividend is 2.5c

[JohnnyTheHorse]

TWR did a capital raise in September 2019 in large part because the RBNZ wouldn't count the then disputed EQC receivable for capital adequacy purposes. With that position now resolved (albeit for an amount less than sought), TWR will have excess capital that it may have difficulty returning to shareholders tax effectively due to an absence of any imputation credits. I therefore favour investing the excess capital to grow the business.

The ability of insurers to pay dividends continues to be under RBNZ surveillance due to COVID concerns on liquidity. Assuming TWR has a more than adequate capital position, small unimputed dividends hopefully won't be far off.

Ah yes I forgot about that, have to eat my hat! Intending to pay a 2.5cps dividend in May (3.8% interim, 8% yearly dividend?).

Should see a rerating with the dividend.

[bull....]

Ah yes I forgot about that, have to eat my hat! Intending to pay a 2.5cps dividend in May (3.8% interim, 8% yearly dividend?).

Should see a rerating with the dividend.

isnt the dividend as always dependant on no big claims

[JohnnyTheHorse]

Targeting full year dividend of 6cps. ~8.5% yield (refer to AGM address).

[JohnnyTheHorse]

Bullish break of weekly/monthly bull flag if it can sustain this, would like a bit more volume to come in. Also breaking above a multi year downtrend.

12332

[Arbroath]

Targeting full year dividend of 6cps. ~8.5% yield (refer to AGM address).

As they are paying full income tax the dividends should be imputed so 6.0cps is a gross yield of about 11.5%

[nztx]

isnt the dividend as always dependant on no big claims

Does that include shelling out for a further portfolio of risks ? ;)

[nztx]

As they are paying full income tax the dividends should be imputed so 6.0cps is a gross yield of about 11.5%


Most may be sure that TWR should be able muster a few creative im-pear-ments to maintain the recent past trajectory .. ;)

[bull....]

Does that include shelling out for a further portfolio of risks ? ;)

i agree with jaa that they probably brought the portfolio instead of risking losing all those customers and the 40 million revenue/ yr. cost $609 per customer approx so they wont get the full benefits of the purchase till the following yr.
and like you say bigger client base means potential risks are more claims on there diminishing investment revenue

[nztx]

i agree with jaa that they probably brought the portfolio instead of risking losing all those customers and the 40 million revenue/ yr. cost $609 per customer approx so they wont get the full benefits of the purchase till the following yr.
and like you say bigger client base means potential risks are more claims on there diminishing investment revenue


Good points there too..

[Southern Lad]

As they are paying full income tax the dividends should be imputed so 6.0cps is a gross yield of about 11.5%

As at 30 September 2020 TWR had tax losses of circa $90m, which a tax benefit of $25.7m had been recognised in the financial statements (assuming all recognised tax losses are NZ tax losses rather than Pacific Islands, etc.). As future profits are earned, the income statement records a tax expenses as these losses are used up. That doesn't mean any tax will be paid to IRD and therefore there won't be any imputation credit available. If TWR made a taxable income in NZ of $30m per year (whick looks about right given the NZ segment profit disclosed for 2020, adjusted for the EQC settlement write off), then it will be three years before they need to pay any tax to IRD and three years before they can attach imputation credits to dividends.

[Arbroath]

As at 30 September 2020 TWR had tax losses of circa $90m, which a tax benefit of $25.7m had been recognised in the financial statements (assuming all recognised tax losses are NZ tax losses rather than Pacific Islands, etc.). As future profits are earned, the income statement records a tax expenses as these losses are used up. That doesn't mean any tax will be paid to IRD and therefore there won't be any imputation credit available. If TWR made a taxable income in NZ of $30m per year (whick looks about right given the NZ segment profit disclosed for 2020, adjusted for the EQC settlement write off), then it will be three years before they need to pay any tax to IRD and three years before they can attach imputation credits to dividends.

Thanks for clarifying that so well. Will check the actual statements next time instead of their presso’s which show tax. Cheers

[Jaa]

i agree with jaa that they probably brought the portfolio instead of risking losing all those customers and the 40 million revenue/ yr. cost $609 per customer approx so they wont get the full benefits of the purchase till the following yr.
and like you say bigger client base means potential risks are more claims on there diminishing investment revenue

I think they bought them so they can transfer the customers to new policies on the new system and turn off their old IT systems. Which is where the big cost savings are. But not without risk.

Note also, bond yields are rising, so Tower's investment revenue will be too for the first time in a long time.

[JohnnyTheHorse]

Bullish break of weekly/monthly bull flag if it can sustain this, would like a bit more volume to come in. Also breaking above a multi year downtrend.

12332

Looking positive for the bull break, but still fighting a bit of resistance at 75. Next areas of major resistance would be 80-82, then 100.

[JohnnyTheHorse]

Insider buying continues... CEO has bought another 95,000 or so on market.

https://www.nzx.com/announcements/368492

[Playa]

maybe a takeover around the corner?

[Gerald]

maybe a takeover around the corner?


Someone can correct me if i'm wrong, but insider buying would mean the opposite (no buyers sniffing), otherwise they would be trading on privileged info.

Still shows confidence though.

[Poet]

Someone can correct me if i'm wrong, but insider buying would mean the opposite (no buyers sniffing), otherwise they would be trading on privileged info.

Still shows confidence though.

You are quite right, there certainly won't be an imminent takeover that the CEO knows about otherwise he would be guilty of insider trading.

[Poet]

You are quite right, there certainly won't be an imminent takeover that the CEO knows about otherwise he would be guilty of insider trading.

But his buying is a definite sign of confidence (as was chairman buying a few weeks ago)

[Balance]

https://www.stuff.co.nz/national/300245006/live-aucklanders-told-to-keep-out-of-the-water-tsunami-waves-expected-for-several-hours-gns-advises

Another natural disaster hit for the insurance sector?

[Poet]

https://www.stuff.co.nz/national/300245006/live-aucklanders-told-to-keep-out-of-the-water-tsunami-waves-expected-for-several-hours-gns-advises

Another natural disaster hit for the insurance sector?

I wouldn't think so.
Now that the EQC has agreed to let private insurers manage the whole of any earthquake related claims, the insurance companies will presumably make a margin on the claims they process for the EQC. So any mild/moderate earthquakes that result in individual property damages below $150k will actually benefit insurance company bottom lines

[850man]

https://www.finder.com/nz/finder-car-insurance-awards-2021

Trademe insurance (essentially Tower with a new face on it) named best vehicle insurer for 2021. Interestingly Tower themselves coming in at 7th place.

[Scrunch]

Looking positive for the bull break, but still fighting a bit of resistance at 75. Next areas of major resistance would be 80-82, then 100.

Closed up at 78 today, although the volume wasn't super-high at 209k. JTH, what sort of volume would be needed to confirm this break?

[JohnnyTheHorse]

Closed up at 78 today, although the volume wasn't super-high at 209k. JTH, what sort of volume would be needed to confirm this break?

We have a confirmed breakout now. This was confirmed by the breakout of resistance, then drop to retest the old resistance (now support) and now the breakout to a new high.

Someone has been accumulating since December and I'm picking they are close to 5% so we will find out who soon. Salt Funds has likely been providing a large portion of the sell volume.

[850man]

https://www.nzx.com/announcements/369318

Some news this morning however I'm not sure of the dignificance of this. Can any of you wise people help me here please?

[JohnnyTheHorse]

https://www.nzx.com/announcements/369318Some news this morning however I'm not sure of the significance of this. Can any of you wise people help me here please?It essentially frees up capital in the business for capital return to shareholders or acquisitions. They currently have excess capital the equivalent on 1/3rd of their market cap. I can appreciate the view of not investing in insurance companies due to the ever increasing risks. However for me, between the turnaround fundamentals from their digital strategy, large insider buying and history of takeover attempts the value proposition is just too large (as part of a well diversified portfolio).

[Arbroath]

it effectively means they are holding $115m of excess capital although the reality is they need a sensible margin of excess capital over the minimum. Not sure what that number should be but maybe $50m or so. They have enough of our capital from rights issues to either pay dividends (not my favourite when they are unimputed) or do a share buyback which would be better, or even a capital return but I doubt they'll do that - probably want to look for more small bolt on acquisitions to drive growth.

[850man]

Thanks JTH, Arbroath

[bull....]

some big off-market trades today. looking very good technically and fundamentally rising bond yields will help twr alot.

[JohnnyTheHorse]

some big off-market trades today. looking very good technically and fundamentally rising bond yields will help twr alot.

Been happening since it was in the 60's. The estimate the person accumulating is now close to 5% so a SSH shouldn't be far off. Has the potential to pop if Salt stops their sell down (although they have plenty more shares to go...).

Disc: in long term portfolio, plus a separate trading position.

[bull....]

Been happening since it was in the 60's. The estimate the person accumulating is now close to 5% so a SSH shouldn't be far off. Has the potential to pop if Salt stops their sell down (although they have plenty more shares to go...).

Disc: in long term portfolio, plus a separate trading position.

im with you on owning this one , agree with everything you have said. i am hoping they do a buyback of shares with surplus funds which would make the fundamental attraction even better make it look very cheap at current prices in hindsight

[tim23]

Inching north on okay volume, that dividend intention announcement has got people interested again.

[Scrunch]

Inching north on okay volume, that dividend intention announcement has got people interested again.

Yea, but that 11c movement from the end of last year is +15%. Go back six months and the price was 60c and its up 38%.

Happy holder

[Southern Lad]

Although not directly impacting insurance companies, the move by the RBNZ to ease restrictions on banks paying dividends will have helped general sentiment on insurance companies having freedom to return excess capital to shareholders. Hopefully the chances of a Tower capital return/on market buy back have improved. See https://www.rbnz.govt.nz/news/2021/03/reserve-bank-retains-some-dividend-restrictions-and-expects-banks-to-be-prudent

[bull....]

huge pre-market crossing in tower

[Gerald]

huge pre-market crossing in tower


Do you have any idea of NZX rules regarding SSH notices. How many days can you delay reporting going over 5% or a decrease from a substantial holder like salt?

0.83 now, starting to absorb those A2 losses :)

[bull....]

Do you have any idea of NZX rules regarding SSH notices. How many days can you delay reporting going over 5% or a decrease from a substantial holder like salt?

0.83 now, starting to absorb those A2 losses :)

Guidance on substantial product holderdisclosures

https://map.nzx.com/static/forms/docs/20170927-Guidance-on-substantial-product-holder-disclosures.pdf

looks like as soon as they can once over 5%

anyway hoping twr really do a share buyback. over $1 if they do i guess

[JohnnyTheHorse]

Beautiful technical setup here. If we get that final multi year resistance break at 83 we are clear sailing to 100. Massive crossing has hopefully cleared that selling pressure (look what happened to MHJ).

[bull....]

another huge crossing just went thru

[JohnnyTheHorse]

another huge crossing just went thru

At higher price of 83 cents too. I've picked up 40,000 more this morning in my trading account.

[JohnnyTheHorse]

A chart to show the significance of these break outs. Daily/weekly/monthly uptrend. It's weekly, so the chart spans several years.

12435

[850man]

A chart to show the significance of these break outs. Daily/weekly/monthly uptrend. It's weekly, so the chart spans several years.

12435

Almost a cup with a handle

[bull....]

A chart to show the significance of these break outs. Daily/weekly/monthly uptrend. It's weekly, so the chart spans several years.

12435

yep also noticing if you look on the weekly/monthly charts that the next resistances are 1.02 - 1.04 from your breakout level

[JohnnyTheHorse]

Crossings started going through at 84c just before close, so that should be the new floor price. Expecting this to pop tomorrow assuming US markets hold up overnight.

[Scrunch]

Crossings started going through at 84c just before close, so that should be the new floor price. Expecting this to pop tomorrow assuming US markets hold up overnight.

I'm sure more sellers will emerge, but currently there's next to nothing on the sell side - only 69,582 shares between 85 and 100. Today there were buyers for 8,594,526 shares on the NZX. There was also 212,840 traded over on the ASX, the highest daily total over the ditch since late Nov.

[bull....]

I'm sure more sellers will emerge, but currently there's next to nothing on the sell side - only 69,582 shares between 85 and 100. Today there were buyers for 8,594,526 shares on the NZX. There was also 212,840 traded over on the ASX, the highest daily total over the ditch since late Nov.

not surprised we are seeing big buying into tower of late. Insurance companies are coming back into vogue. YTD in the US insurance ETF are up 15% and sub sector of insurance stocks in the US are up similar.
In AUS the buying has started in the last 10 days of these insurance stocks ie the QBE , SUN , NIB etc in NZ we have tower as the stock in the sector to buy.

When you think about it sort of makes sense with the rise in bonds makes them more money as it improves there investment returns on that side of the ledger combined with rising premiums these sort of stocks will make outsized profits again in time when rates normalise in time. ie back to the days of big dividends these stocks used to provide.
Tower i dont think has had many adverse events of late and is siting on to much capital so makes it particularly favourable to some sort of capital action occuring

[JohnnyTheHorse]

https://www.nzx.com/announcements/370755

New Zealand Funds Management has increased 1%. The big takeaway from this though (by looking at their transactions) is that there is at least one other large buyer accumulating as well.

With 2% of float traded yesterday we should be seeing further SSH notices today or Monday.

[bull....]

https://www.nzx.com/announcements/370755

New Zealand Funds Management has increased 1%. The big takeaway from this though (by looking at their transactions) is that there is at least one other large buyer accumulating as well.

With 2% of float traded yesterday we should be seeing further SSH notices today or Monday.

the interesting part to me is they are for the dividend yield funds. 2.5c / share if rerplicated at full year is 5cps full yr so gross yield would imply 8.16% return / yr so its no wonder they see it as a yield fund stock

[Poet]

I'd expect fy dividend to be slightly higher than half year
So probably 6c per share total giving great yield
Also good pile of surplus cash
Disc
My biggest holding by far at 25%
Accumulating from 58c so looking good so far

[sb9]

Looks like its all set for another pop, dipped in my toes y'day with a moderate stake.

[bull....]

plenty of institution notices yesterday on the sell side. still waiting for the notice to see who.s been soaking up the many millions of shares being off-loaded and absorbed. the selling should be only viewed as an opportunity for overweight insto's to re-weight due to big demand for a undervalued stock.

[sb9]

plenty of institution notices yesterday on the sell side. still waiting for the notice to see who.s been soaking up the many millions of shares being off-loaded and absorbed. the selling should be only viewed as an opportunity for overweight insto's to re-weight due to big demand for a undervalued stock.

If its new fund they don't have to declare until they hit 5% threshold which is about 21mln shares. So it may take some time to know who the buyer may be.

[JohnnyTheHorse]

If its new fund they don't have to declare until they hit 5% threshold which is about 21mln shares. So it may take some time to know who the buyer may be.

Around 15% of the float has been traded since results end of Nov. Ever since then there has been a consistent trend of large off market purchases at or above market price. Must be at least a couple of funds buying.

[sb9]

Around 15% of the float has been traded since results end of Nov. Ever since then there has been a consistent trend of large off market purchases at or above market price. Must be at least a couple of funds buying.

Sure, off market acquisition seem to be norm as another big one goes through..



86.5
2,400,000
14:31
SP

[sb9]

Nice clearance of the lot at close of play at 87c.

[Southern Lad]

I see the Australian media have been running stories on the parties participating in a process to buy CBA’s general insurance business. Maybe this has highlighted the value of Tower and increases the chances Bain may instigate an auction to find a buyer for Tower now that Tower’s house is in (relative) order?

[Poet]

I see the Australian media have been running stories on the parties participating in a process to buy CBA’s general insurance business. Maybe this has highlighted the value of Tower and increases the chances Bain may instigate an auction to find a buyer for Tower now that Tower’s house is in (relative) order?

Yes, interesting - the sale price for CBA business is likely to be around 1.3 times Gross Written Premium (same multiple as recent sale of Westpac's general insurance business)
Applying the same metric to Tower's business would see a value around 1.3 times $385m GWP = $500.5. If we add the current cash assets of $140m we get a total value of $640m or $1.52 per share. So some 75% potential upside to the current $0.87

[winner69]

Yes, interesting - the sale price for CBA business is likely to be around 1.3 times Gross Written Premium (same multiple as recent sale of Westpac's general insurance business)
Applying the same metric to Tower's business would see a value around 1.3 times $385m GWP = $500.5. If we add the current cash assets of $140m we get a total value of $640m or $1.52 per share. So some 75% potential upside to the current $0.87

Wow ..sounds too good to be true

If it happened Salt Funds be slightly peeved but could still crow about doing well.

Might need to buy some more

[winner69]

Yes, interesting - the sale price for CBA business is likely to be around 1.3 times Gross Written Premium (same multiple as recent sale of Westpac's general insurance business)
Applying the same metric to Tower's business would see a value around 1.3 times $385m GWP = $500.5. If we add the current cash assets of $140m we get a total value of $640m or $1.52 per share. So some 75% potential upside to the current $0.87

so 'current cash assets' of 140m are about 33 cents a share - v current share price of 87 cents - implying market only valuing TWR at 54 cents?

I thought the 140m was only Tower's solvency margin

Be good if we got 152 plus in a takeover though

[Southern Lad]

Presumably it’s only the cash on hand above the required solvency margin which can be described as surplus. Cash required to be held to operate the insurance business would be included in the valuation of the insurance business.

A key question is who the likely bidders for Tower would be given that both IAG and Suncorp would face regulatory issues on the competition front. Given the banks are getting out of insurance, then other likely parties are offshore insurance companies looking to expand in NZ.

[macduffy]

Good point, S Lad. The further question is whether the govt or regulator/s would be happy seeing the last significant NZ general insurer being bought by foreign interests.

[Poet]

Presumably it’s only the cash on hand above the required solvency margin which can be described as surplus. Cash required to be held to operate the insurance business would be included in the valuation of the insurance business.

A key question is who the likely bidders for Tower would be given that both IAG and Suncorp would face regulatory issues on the competition front. Given the banks are getting out of insurance, then other likely parties are offshore insurance companies looking to expand in NZ.

That's one way of looking at it, and you are certainly on the side of the popular view given the current shareprice. I prefer to take the view that there will be bidders and that the assets are seriously undervalued - especially taking account of the cash and cash equivalents that will be released in the event of a successful sale.
I think this is the most seriously undervalued share on the NZX at the moment. Time will tell I guess GLTAH

[tim23]

That's one way of looking at it, and you are certainly on the side of the popular view given the current shareprice. I prefer to take the view that there will be bidders and that the assets are seriously undervalued - especially taking account of the cash and cash equivalents that will be released in the event of a successful sale.
I think this is the most seriously undervalued share on the NZX at the moment. Time will tell I guess GLTAH

An the dividend yield is going to stack up pretty good too

[Southern Lad]

That's one way of looking at it, and you are certainly on the side of the popular view given the current shareprice.

Interesting point to compare the Tower approach of leaving reserves in short term fixed interest investments verses the Warren Buffet approach that there is free money that can be invested to ramp up the returns available to shareholders by putting this capital to work. Is there some RBNZ requirements on what form the required capital is required to be held in or is is just that the Tower board and management have taken a very conservative approach? Looking at the financial statements for the Suncorp NZ holding company on the Companies Office website, I see their investments are also in fixed interest securities, so maybe it’s a RBNZ requirement.

[percy]

If insurance companies have their "float" earning little return in fixed interest,that must mean their profits must be generated in underwritting.
History tells us there a few profits there,it was always been the "float" that was profitable.As Southern Lad pointed out, the "float" was what attracted Warren Buffet's attention.

[Nor]

I had a few but got tired of waiting for a dividend. I reckon that in this climate change world and shaky NZ, insurance companies are not for me.

[bull....]

towers free float would be increasing at the moment. free float can increase thru aquisitions ie thru the purchase of ANZ insurance in feb and the purchase of youi insurance and also thru organic growth ie tower stated in an announcement they were 6% odd organic growth GWP. so next report should show a nice increase in investment income.

[bull....]

A.M. Best reaffirms Tower Limited’s A- (Excellent) credit rating

https://www.nzx.com/announcements/371211

see nib and steadfast insurance companies in aus/nz in the last 2 days have both upgraded earnings

[X-men]

Plenty of holders want to get out...
Not to mention global warming n on going nature disasters

[Antipodean]

Just as many people looking to get in. I should know, I'm one.

I understand people who have/were already invested over the past 5 years or so are likely not too happy. Understandably. I've been there.
For me, from a perspective of a relatively new investor (1st buy Oct 2020) looking forward, I am liking what I see.

Aside from all the insider buying late last year, the fundamentals are offering a potential upside from here.

TWR now has a dividend policy of 60%-80%... reported full NPAT adjusted... [23/2/2021, 8:31 am MKTUPDTE]
Earnings guidance for next full year is 5% above previous year underlying NPAT of $28.4m
Even if we take out the 5%, HY NPAT $14.2m @ 70% NPAT would be ~2.4 cps dividend. This is close to their indicative dividend of 2.5cps.
At current .88 sp, that is a annualised 5.4% gross yield off the bat.

On the other side, a 28.4m NPAT is 6.7 (c)eps which at .88 sp that is a p/e of just over 13.
After completing all the recent investments internally and acquisition wise - should expect some growth in there perhaps?
Other insurers (admittedly not nzx - no listed direct comparisons in industry) usually go for 18+ p/e.
Even at 16 p/e that is a sp of $1.07 which is a 22% increase from here.

Really looking forward to the HY next month.

[tim23]

Just as many people looking to get in. I should know, I'm one.

I understand people who have/were already invested over the past 5 years or so are likely not too happy. Understandably. I've been there.
For me, from a perspective of a relatively new investor (1st buy Oct 2020) looking forward, I am liking what I see.

Aside from all the insider buying late last year, the fundamentals are offering a potential upside from here.

TWR now has a dividend policy of 60%-80%... reported full NPAT adjusted... [23/2/2021, 8:31 am MKTUPDTE]
Earnings guidance for next full year is 5% above previous year underlying NPAT of $28.4m
Even if we take out the 5%, HY NPAT $14.2m @ 70% NPAT would be ~2.4 cps dividend. This is close to their indicative dividend of 2.5cps.
At current .88 sp, that is a annualised 5.4% gross yield off the bat.

On the other side, a 28.4m NPAT is 6.7 (c)eps which at .88 sp that is a p/e of just over 13.
After completing all the recent investments internally and acquisition wise - should expect some growth in there perhaps?
Other insurers (admittedly not nzx - no listed direct comparisons in industry) usually go for 18+ p/e.
Even at 16 p/e that is a sp of $1.07 which is a 22% increase from here.

Really looking forward to the HY next month.

You sum it up nicely, finally turning the corner, still cheap v its peers,

[bull....]

Tower launches partnership with NZ Defence Force
Tower Insurance has partnered with the New Zealand Defence Force (NZDF) to provide tailored insurance policies to more than 150,000 people, covering current and former service people, and their families.
https://www.goodreturns.co.nz/article/976518516/tower-launches-partnership-with-nz-defence-force.html

[Azza]

I'll have to check that out and see if it's any better than market offerings... I'll be sure to let you all know if everyone starts jumping ship

[winner69]

Salt has TWR as their biggest long in their long/short fund

Last update they said this -

The second largest tailwind came from another familiar name -our very large long in Tower Limited (TWR, +10.1%). A further piece of the puzzle fell into place with the RBNZ reducing TWR’s minimum required solvency margin from $50m to $25m in recognition of the progress that has been made on settling Christchurch earthquake claims. The remaining $25m overlay will be reviewed in 12 months and we expect it will be removed.

This reinforces our thesis of TWR being a company that is awash in capital and which has an array of organic and inorganic growth opportunities with which to invest it accretively

[bull....]

Today, Kiwi insurer Tower announced it is partnering with CSC Buying Group (http://www.csc.org.nz/) and New Zealand InsurTech start-up Sentro (file:///C:/Users/Louisa/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/2N4E3X0C/ww.sentro.co) to provide hundreds of thousands of New Zealanders with access to discounted insurance for the first time

https://www.scoop.co.nz/stories/BU2105/S00195/tower-partnership-a-win-for-consumers.htm

[Antipodean]

Really leveraging that new tech platform

[nztx]

Really leveraging that new tech platform


wonder if they're discounting any claims on business written off there ? ;)

Nothing like diving in the deep end to discover the depth properly and further enhance exposures to said risks
... that is until things go badly awry ;)

I guess we better hope that no 'Adverse Events' or further potential Acquisitions that interest the TWR Board
crop up in the short - medium term, or prospect of a dividend might be curry ... yet again .. ;)

[Antipodean]

wonder if they're discounting any claims on business written off there ? ;)

Heh you know that's not how insurance works, the claim costs are the claim costs.
At a guess there is likely more savings in admin costs and some scaling efficiencies coming from this kind of deal.



I guess we better hope that no 'Adverse Events' or further potential Acquisitions that interest the TWR Board
crop up in the short - medium term, or prospect of a dividend might be curry ... yet again .. ;)

Yes I hope people are aware the dividend is in no way guaranteed, just intended. Tower is still on the path of needing to display long term reliability regarding the dividend stream.

Adverse events are a constant reality for any insurance company, that is what reinsurance is for though.

Acquisitions are fine so long as they add longer term value. I'm ambivalent as to whether funds go towards good acquisitions or dividends. Just have to assess each one on its merits.

[X-men]

Downgrade...auchh

[Leftfield]

Downgrade...auchh

Bad news sneaked out at the end of the day.... here's the link. (https://www.nzx.com/announcements/372325)

[percy]

If insurance companies have their "float" earning little return in fixed interest,that must mean their profits must be generated in underwritting.
History tells us there a few profits there,it was always been the "float" that was profitable.As Southern Lad pointed out, the "float" was what attracted Warren Buffet's attention.

And from today's announcement we see a very poor use of the float.
The low interest rate environment is impacting investment income, with $0.6m income in the first half of 2021 compared with $2.2m in the corresponding period of 2020.

[X-men]

So lucky did not get suck in with 2.5c dividend. Just like ZEL... dividend trap?

[winner69]

That’s one decent downgrade ....$30m down to $25m

And some hints of another downgrade before year ends in September

[X-men]

Bull..your star stock issued a downgrade ...what are your thoughts?

[winner69]

So all the good news that’s come out of Tower over the last six months or so is going to result in F21 profits being less (maybe quite a lot less) than F20

[JohnnyTheHorse]

A disappointing update for sure. But is it a minor setback in their turnaround or is it a large red flag?

Negatives:
- Large claims appear to be much higher than anticipated
- Increase in GWP has not translated through to profits
- Is investment income acceptable?

Positives:
- They have identified an issue and appear to be acting quickly to reprice risk. They should only get better over time with they electronic data platform they have been investing in
- Should see strong GWP growth going forward
- They are well placed to increase prices to manage claims inflation
- With rates increasing their investment income should increase

Overall even with this downgrade it'll be on a gross yield of ~8%. Looks like it'll take another 12 months to see whether this is fairly priced at current levels or whether this is a true turnaround stock. With the large management / insider holding I am picking the later but will be keeping a close eye on things...

[bull....]

Bull..your star stock issued a downgrade ...what are your thoughts?

a downgrade always disappointing.

but i guess its not entirely surprising , building costs have been going up quickly this year ( they note its higher than normal event of claims related to big house claims so you would expect a decline to more normal levels in the future)
it wont be just tower but will be affecting all insurers and not only insurers but also numerous other industries eg retirement stocks

luckily for tower they will be able to mitigate the cost increases of building related claims by making us pay more for insurance as i imagine all insurance companies will do. so i dont see it as an issue in the future if correctly addressed.

if you believe rates have bottomed recently worldwide and we are in a environment of rates normalising up now then there investment income should have bottomed recently as well.

all insurance companies always report adverse events every year so its never a surprise something happens at some stage to report , just the normal course of events. anyway looking forward to my dividend

[winner69]

Is this little bit a signal of a further downgrade ....or a bit of let’s hope it’s all OK

Separately, following a review of the FY21 reinsurance programme, there could potentially be an increase in the full year reinsurance costs for FY21. It is anticipated the additional costs, if any, would be within the tolerances of this guidance.

[Balance]

Is this little bit a signal of a further downgrade ....or a bit of let’s hope it’s all OK

Separately, following a review of the FY21 reinsurance programme, there could potentially be an increase in the full year reinsurance costs for FY21. It is anticipated the additional costs, if any, would be within the tolerances of this guidance.

You know the drill, W69 - downgrades come in threes.

[winner69]

You know the drill, W69 - downgrades come in threes.

Tower seem to have three a year ...most years

And then seduce punters with the promise of a divie.

[bull....]

balance and winner ..... downgrade lol. stirring the pot

[Balance]

balance and winner ..... downgrade lol. stirring the pot

Hardly, bull .... calling it as it is as I did with ATM.

But for the Chairman buying Tower shares, I would have completely bailed out a while ago. Regrettably I did not but such is life.

[peat]

as a non holder (serial underperformer) whats interesting to me is the inflationary pressure and where it is, in terms of other NZX businesses and indeed NZ social policy going forward

Did I see GOvt stock (Local tho) offering 2.85% ??

[bull....]

Hardly, bull .... calling it as it is as I did with ATM.

But for the Chairman buying Tower shares, I would have completely bailed out a while ago. Regrettably I did not but such is life.

hardly atm here balance.
you shouldnt invest in these companies if you dont understand the risks around adverse events.

[winner69]

Hardly, bull .... calling it as it is as I did with ATM.

But for the Chairman buying Tower shares, I would have completely bailed out a while ago. Regrettably I did not but such is life.

I think they did a downgrade about this time last year as well

[Balance]

hardly atm here balance.
you shouldnt invest in these companies if you dont understand the risks around adverse events.

No sweat with me, bull ... I made good gains bailing out of this stock having got in at a very good level (following the Chairman's lead).

Technicals say it is heading down towards 70 cents as sp is falling through all technical support points?

[bull....]

No sweat with me, bull ... I made good gains bailing out of this stock having got in at a very good level (following the Chairman's lead).

Technicals say it is heading down towards 70 cents as sp is falling through all technical support points?

it was over brought at 88c , not now though. if your lucky your get a share buy back announcement this week

[Balance]

it was over brought at 88c , not now though. if your lucky your get a share buy back announcement this week

Not with two more profit downgrades to come imo.

[bull....]

Not with two more profit downgrades to come imo.

i could up that too 5 lol such is betting on adverse weather or such events. your guaranteed to get something happen

[Balance]

i could up that too 5 lol such is betting on adverse weather or such events. your guaranteed to get something happen

Love the lol - can see you are nervous.

Chill, bull .... the trend is your friend as you well know so do whatever your trend tells you to do, right?

[850man]

over-reaction? the volume thus far today / yesterday arvo is not huge.

[bull....]

Is this little bit a signal of a further downgrade ....or a bit of let’s hope it’s all OK

Separately, following a review of the FY21 reinsurance programme, there could potentially be an increase in the full year reinsurance costs for FY21. It is anticipated the additional costs, if any, would be within the tolerances of this guidance.

if they didnt adjust re-insurance cover it would mean you would as the consumer pay more for your cover. nothing sinister in it as it also protects there risk as well meaning less chance of them going bust due a big adverse event.

[Beagle]

I ran the ruler over these this morning and got a fair value of 64 cents.

[Balance]

over-reaction? the volume thus far today / yesterday arvo is not huge.

The low volume usually mean one of two things when there is a profit downgrade or price sensitive development :

1. Over-reaction as you think, or

2. Buyers' retreat which necessitates sellers going ever lower to get out of the stock in volume.

2 seems to be the case now with TWR here as price has fallen rather sharply imo.

Buying depth looks very thin while selling depth continues to build up substantially. :eek2:

[Balance]

Love the lol - can see you are nervous.

Chill, bull .... the trend is your friend as you well know so do whatever your trend tells you to do, right?

Good luck, bull ..., trying to get out of 50,000 shares today! :scared:

[bull....]

Good luck, bull ..., trying to get out of 50,000 shares today! :scared:

lol i sold my trading portion at 87 i hold my divi portion long time yum yum 8% divvies

[Balance]

lol i sold my trading portion at 87 i hold my divi portion long time yum yum 8% divvies

Really?

Now where & when did you post:p that fact?

[winner69]

Hard to get enthused over Tower's profit trend

In spite of all the rhetoric about all the exciting things they are doing profit over three years basically gone nowhere-

F19 $27.4m
F20 $28.4m
F21 $26m expected

[Antipodean]

The combined effect of the large house claims and investment 'income' knocks 5.7m off the figures for the year. In the world where this didn't happen they would have well beaten guidance, but insurance is about sudden unexpected events so have to re-consider when these things happen. This could have been slipped in the announcement next week but at least front footing it during the middle of the week (rather than a 4pm Friday release) is a decent sign.

Large house claims can't be helped retrospectively however they are able to incorporate trends into new premium ratings for upcoming years.
Investment income is pretty pitiful and can only wonder if holding all those assets in fixed yields is partly related to capital requirements which are expected to ease in the future.

Share Price of .64 / 270m mcap implies a 10-10.8 p/e with annualised 7.81% gross dividend yield certainly I would agree there is value there! (some would say more than fair value). At sp of .77 you are looking at 12-13 p/e with 6.49% gross dividend yield where we have currently fallen to. Value? Up to you.

Twr advises expected gwp to exceed by 5% previous year so is close to $400m, which is up from just over $350m at ye 2019. Despite the ups and downs net earned premium tends to trend up with gwp. In addition total comprehensive profit is still in uptrend even with this downgrade.



TWR
2017
2018
2019
2020









Net Earned Premium
256915000
268842000
290020000
315332000









Total Comprehensive Profit For the Year
-7677000
-6331000
17871000
11016000



Worth noting the wording on reinsurance has 'if any' and also notes that it wouldn't affect guidance (will this hold?).

Still some silver lining it is worth noting the part where CEO states :

Tower remains confident that our current strategy delivers sustainable value, and ... will add significant growth in premiums and profitability, beginning late in FY21 but with the full benefits realised in FY22 and beyond

So depends if you are in for (and believe) the long story or not.

[850man]

Someone bought a million shares a bit earlier. Wonder what they know that the rest of us don't

[Balance]

Someone bought a million shares a bit earlier. Wonder what they know that the rest of us don't

Someone sold 1 million shares so you could wonder the same? What does the seller know?

[Beagle]

Hard to get enthused over Tower's profit trend

In spite of all the rhetoric about all the exciting things they are doing profit over three years basically gone nowhere-

F19 $27.4m
F20 $28.4m
F21 $26m expected

And that's precisely why I put them on a no growth PE of 10.5 (assuming 10 year Govt stock rate at 2%) x mid point of this years earnings of 6.1 cps = 64 cents per share.

Talk of profit growth is just that, "talk" and I ascribed no value to that probability. Was a lot of talk about Tower at the recent Auckland ST gettogether...I just listened and kept drinking Tui's. I just can't get warm about it. Unusually some extreme weather event happening every now and again, often more than once a year.

[Poet]

And that's precisely why I put them on a no growth PE of 10.5 (assuming 10 year Govt stock rate at 2%) x mid point of this years earnings of 6.1 cps = 64 cents per share.

Talk of profit growth is just that, "talk" and I ascribed no value to that probability. Was a lot of talk about Tower at the recent Auckland ST gettogether...I just listened and kept drinking Tui's. I just can't get warm about it. Unusually some extreme weather event happening every now and again, often more than once a year.

Firstly, welcome back Beagle, good to hear your views again.

Secondly, if you ascribe a fair value of 64c per share on the basis of Tower being no growth company, why not add on the 30 odd cents per share that the company has in cash That is the cash the company is holding over and above what is required to operate and generate the no growth $26m pa profit (actually there is probably more cash surplus than that)
That cash could be returned to shareholders in some form and still leave a company with the underlying $0.64 share value

[bull....]

Firstly, welcome back Beagle, good to hear your views again.

Secondly, if you ascribe a fair value of 64c per share on the basis of Tower being no growth company, why not add on the 30 odd cents per share that the company has in cash That is the cash the company is holding over and above what is required to operate and generate the no growth $26m pa profit (actually there is probably more cash surplus than that)
That cash could be returned to shareholders in some form and still leave a company with the underlying $0.64 share value

exactly need to factor in the cash , also what they do with the cash. share buyback adds to eps.

[winner69]

exactly need to factor in the cash , also what they do with the cash. share buyback adds to eps.

Could buy back a third of the company with that much cash ...wow

[Beagle]

Firstly, welcome back Beagle, good to hear your views again.

Secondly, if you ascribe a fair value of 64c per share on the basis of Tower being no growth company, why not add on the 30 odd cents per share that the company has in cash That is the cash the company is holding over and above what is required to operate and generate the no growth $26m pa profit (actually there is probably more cash surplus than that)
That cash could be returned to shareholders in some form and still leave a company with the underlying $0.64 share value

Hi Poet,
Thanks for your kind words, much appreciated. I just valued it based on earnings. If they have room to move and do engage in some sort of special dividend or buy-back then I guess that's going to be value accretive but if its so obvious as a way to add shareholder value why don't they do something ?

[winner69]

Hi Poet,
Thanks for your kind words, much appreciated. I just valued it based on earnings. If they have room to move and do engage in some sort of special dividend or buy-back then I guess that's going to be value accretive but if its so obvious as a way to add shareholder value why don't they do something ?


All that cash earning a pittance at the moment ...$600k in first half they say

[peat]

All that cash earning a pittance at the moment ...$600k in first half they say

insurance companies need quite good liquidity given the possibility of a big risk event occurring.
As has been said these seem to happen more than expected.

[Antipodean]

If you add the cash (80m) and investments (237.4m) from last FY report together, you have $.77/share real assets backing the company up without any consideration of revenue.

[Balance]

If you add the cash (80m) and investments (237.4m) from last FY report together, you have $.77/share real assets backing the company up without any consideration of revenue.

Eh - what about the liabilities?

[winner69]

Eh - what about the liabilities?

Won’t be any claims so no worries ;)

[Balance]

All that cash earning a pittance at the moment ...$600k in first half they say

Yes, bugger that they have to hold the investments in gilt-edged bonds and bank deposits which pay bugger all - and rising bond rates would have significantly reduced bond values?

[winner69]

Balance - do actuaries still exist or Is the calculation of likely future liabilities all done by AI ...and hope they dont get it wrong.

I worked at Tower many many years ago and the actuary was God ....one of them tried to get me to become one as he thought I had the smarts to be a good one ...but it seemed a pretty boring job....and they weren't exactly the life and soul of the party

[KJMLimited]

Not forever though. Bonds expire and get replaced by higher yield paper. In theory.

[Balance]

Not forever though. Bonds expire and get replaced by higher yield paper. In theory.

Agree if the bonds are held through to maturity - the M-T-M then is simply an accounting valuation exercise.

Insurance companies do have to sell bonds though to meet ongoing claims so losses (or gains) are realized when said sales happen.

[KJMLimited]

They could sell short dated bonds first which in theory trade close to par.

[Balance]

They could sell short dated bonds first which in theory trade close to par.

Comes down to their Treasury view & portfolio decision.

In the good old days, the insurance companies were allowed to have a large equity portfolio and man, some of them used to trade their positions like they were Gordon Gecko!

[peat]

Comes down to their Treasury view & portfolio decision.

In the good old days, the insurance companies were allowed to have a large equity portfolio and man, some of them used to trade their positions like they were Gordon Gecko!

but of course they went broke and no one wants a broke insurer. :p

[Sideshow Bob]

Half Year:

Tower Limited HY 2021 Results for Announcement to Market - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/372843)

Microsoft Word - 2b. TWR HY Media Release (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com) (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/372843/346906.pdf)

[ados_nz]

6.5% dividend yield?

[winner69]

6.5% dividend yield?

Almost too good to be true eh

[mike2020]

Is it true though? :mellow: Did you participate in the CR? Were you waiting for the EQC settlement?

[JohnnyTheHorse]

Insiders buying more. Blair with another 90,000...

https://www.nzx.com/announcements/372899

[bull....]

6.5% dividend yield?

10% gross at 75c

[Poet]

10% gross at 75c

Dividend is not imputed as far as I can see, so assuming a full year 5.5c dividend gives us a gross yield of 7.3% at 75c share price

[nztx]

Dividend is not imputed as far as I can see, so assuming a full year 5.5c dividend gives us a gross yield of 7.3% at 75c share price


that seems correct - nothing attached to the 2.5 cps coming up

FY Accounts 2019 & 2020 (Sep 30) both have closing imputation credits at $271K so no tax being paid
to allow for credits to be attached from what I can see ..

I dont know if credits were attached in days before dividend was suspended as Div history
doesn't show up on NZX site - so it must be at least 3 years since a dividend was paid by TWR

Others may know when last div was paid out

Imputation credits attached make quite a difference to Gross Div Yield

[bull....]

Dividend is not imputed as far as I can see, so assuming a full year 5.5c dividend gives us a gross yield of 7.3% at 75c share price

correct i must have been thinking 10% when they get back to having imputation credits

[Southern Lad]

As at 30 September 2020 TWR had tax losses of circa $90m, which a tax benefit of $25.7m had been recognised in the financial statements (assuming all recognised tax losses are NZ tax losses rather than Pacific Islands, etc.). As future profits are earned, the income statement records a tax expenses as these losses are used up. That doesn't mean any tax will be paid to IRD and therefore there won't be any imputation credit available. If TWR made a taxable income in NZ of $30m per year (whick looks about right given the NZ segment profit disclosed for 2020, adjusted for the EQC settlement write off), then it will be three years before they need to pay any tax to IRD and three years before they can attach imputation credits to dividends.

See my earlier post on the tax losses recorded in the TWR September 2020 financial statements. As noted, it is likely to be at least three years before TWR moves back into a tax paying position and will therefore generate imputation credits to attach to dividends.

[JohnnyTheHorse]

With the dividend you need to keep in mind that the company is sitting on close to $100m of excess solvency margin (which will increase further next year). On the assumption that this capital is either returned to shareholders, buyback of shares or used to fund earnings accreditive acquisitions, you can expect earnings per share and hence dividend yield to increase 50% from current levels in future (and this is before any normal growth). This is a deep value play (I note comments from Balance re this sector are valid, however in my view the risk/reward stacks up well here).

Management have bought and continue to buy meaningfully large positions. They see the value and back themselves to deliver the growth over the medium term.

I still expect however that Bain will be trying to shop this around and it will be subject to a takeover.

[Jaa]

Who just sold around 3 million shares at 70c?

[Balance]

https://www.nzherald.co.nz/nz/weekend-weather-canterbury-bracing-for-rain-deluge-rare-red-warning-issued/IM7VVZLR4PQAGMCCDI33PUX6DE/

Probably more ‘abnormal event’ claims to hit the insurance sector and Tower.

Thing is, these abnormal events are normal and realistically, insurance companies have to keep cranking up premiums as high and as fast as they can to ‘weather’ these events.

[ados_nz]

Someone watching the rain radar?

[winner69]

https://www.nzherald.co.nz/nz/weekend-weather-canterbury-bracing-for-rain-deluge-rare-red-warning-issued/IM7VVZLR4PQAGMCCDI33PUX6DE/

Probably more ‘abnormal event’ claims to hit the insurance sector and Tower.

Thing is, these abnormal events are normal and realistically, insurance companies have to keep cranking up premiums as high and as fast as they can to ‘weather’ these events.

As long as it’s not as bad as the Timaru hail stones it’ll be all OK

[mike2020]

Id expect some claims but so far everything is holding together.

[Balance]

Now lets see if they can claw back that divie

They will pay that dividend & the next one imo. There’s enough balance sheet capacity & underlying earnings to do so.

Issue with Tower is the state of the insurance industry & the recurring ‘one-offs’ which many investors would now view as normal.

https://www.nzherald.co.nz/nz/wild-weather-hits-new-zealand-heavy-rain-flooding-fears-for-christchurch-canterbury/CE5ZG7CIANC6WBPJWBUEOC4O2Y/

So Tower comes across as a company with volatile earnings & with the latest results, as a company with limited earnings growth potential.

[Beagle]

Unfortunately, as per my previous post on this on 18 May, with the ever increasing effects of climate change extremely unusual weather events like the rain affecting Canterbury this weekend are going to be more and more frequent to the point where they become so regular they become normal. Not a good sector in my opinion.

I can't take any credit for this insight as I was very fortunate to have a very loyal client who worked on contract for Metservice for over 50 years. Lovely old chap and the last time I saw him when he retired he told me, don't believe all this one in 100 year weather event nonsense. You'll get at least one, more often two of these so called one in one hundred year weather events every year. He went on and told me some other really scary stuff....basically the amount of methane now being released from ice sheet melting means we are on an irreversible road to catastrophic climate change irrespective of what we do with CO2 emissions. https://cage.uit.no/2021/04/28/methane-release-rapidly-increases-in-the-wake-of-the-melting-ice-sheets/

[Gerald]

Unfortunately, as per my previous post on this on 18 May, with the ever increasing effects of climate change extremely unusual weather events like the rain affecting Canterbury this weekend are going to be more and more frequent to the point where they become so regular they become normal. Not a good sector in my opinion.

Then surely you got to worry about owning Turners selling dirty combustion cars, Genesis with its dirty coal plant/kupe and Heartland with all that dirty rural debt on its books :p

[Balance]

Then surely you got to worry about owning Turners selling dirty combustion cars, Genesis with its dirty coal plant/kupe and Heartland with all that dirty rural debt on its books :p

It's different because Beagle does not own shares in Tower.:D

[Scrunch]

If there were 20 distinct locations within the country, a 1 in 100 event should happen to the country every five years. There are multiple types of events that are individually described by there frequency, so you get back to an event every few years. Start considering 1:20 year events and a year without something should be the exception.

Across the country seeing regular (but not super regular) infequent events shouldn't be a problem if Tower has done the underlying risk maths correctly. Some risks vary by location and Tower is at least some of the way towards higher premiums where there is a higher claim risk.

[winner69]

Tower said as it was experiencing higher call volumes than usual, due to the state of emergency in Ashburton, it was asking people from other areas with non-urgent inquiries to lodge their claims online through the My Tower app, or via its website.

“We hope everyone is keeping safe. Make sure to take extra care on the roads or avoid driving if possible, and if water has entered your house, make sure to turn the power off,” it said in a Facebook post.


https://www.stuff.co.nz/business/money/125294167/insurers-wont-know-cost-of-canterbury-floods-for-some-weeks

[Beagle]

It's different because Beagle does not own shares in Tower.:D

LOL you naughty dog.

[winner69]

Insurance companies made huge fortunes over the years ‘investing’ the premiums in oil / coal and other ‘evil’ companies which are to blame for climate change

Now they bemoan more regular climate change induced big events etc etc and having to manage the risks around them.

Certain irony ...but at the end of the day I suppose we all pay the penalty

[Jaa]

Insurance companies made huge fortunes over the years ‘investing’ the premiums in oil / coal and other ‘evil’ companies which are to blame for climate change

Now they bemoan more regular climate change induced big events etc etc and having to manage the risks around them.

Certain irony ...but at the end of the day I suppose we all pay the penalty

This is a good narrative but not a winning one when it comes to Tower. They mostly invest in government bonds.

[winner69]

This is a good narrative but not a winning one when it comes to Tower. They mostly invest in government bonds.

Do now but probably not in the good old days ...but then they were mainly a life company (and government controlled)

My first interest in Tower came from when they mutualised around 1990 ....good when they demutualised though and they were listed on the NZX

[ronaldson]

Am I the only one who thinks we should be provided with a claims update following the Canterbury floods?

[Antipodean]

Am I the only one who thinks we should be provided with a claims update following the Canterbury floods?

Claims are still being lodged, adjusters reporting, quotes being obtained and approved. It doesn't all get confirmed in a few days or even a week. Even with work underway invoices will be sent back to HO for payment and that adds a bit more time. Typically it's not worth reporting on claims under they are in (or close to) a finalised state to get an accurate understanding of costs.

Flooding claims aren't nearly as costly as fire or other large events. Modern carpets are relatively easy and cheap to replace, and a lot of furniture and interiors can be dried out and salvaged with modern industrial blowers. We'll see in due time.

[Poet]

Claims are still being lodged, adjusters reporting, quotes being obtained and approved. It doesn't all get confirmed in a few days or even a week. Even with work underway invoices will be sent back to HO for payment and that adds a bit more time. Typically it's not worth reporting on claims under they are in (or close to) a finalised state to get an accurate understanding of costs.

Flooding claims aren't nearly as costly as fire or other large events. Modern carpets are relatively easy and cheap to replace, and a lot of furniture and interiors can be dried out and salvaged with modern industrial blowers. We'll see in due time.

And, in any case, I don't think water got into very many houses. Most of the damage was land/fencing/public infrastructure (and a few vehicles from what I saw)

[sb9]

Oh dear, just when things were looking bright, a second downgrade. Glad I cut my losses and sold out at first downgrade release. They sure have some bad luck on their side.

GLTAH.

[peat]

I Some risks vary by location

I've worked in the insurance industry and quite frankly, if I was an underwriter, I'd take the whole Sth Is. off my book.
But it doesnt work like that ... scale is critical. I think Scrunch is right saying any one place may only experience a one in a hundred every hundred years but that still gives for a lot of disasters over all the possible locations. But yeh I know what we are all thinking about risk. Its riskier than we think!!

[ronaldson]

Looks like an average of around $20k per Canterbury rain event claim is anticipated ( combination of motor, contents and house policies - less any excess ) with perhaps a few more than the 164 currently lodged. Tower claim just over 9% of national general insurance policies in force, with a bias to motor. I wonder what proportion of claims for this event are held by Tower? Suggests around 2000 residential/motor insurance claims will be generated overall by this event across the industry. Of course much damage will be uninsured/uninsurable so losses much higher.

[kiora]

"8% increase in claims cost due to building costs"
https://www.pressreader.com/category/business/en/nz

[kiora]

"8% increase in claims cost due to building costs"
https://www.pressreader.com/category/business/en/nz

[Beagle]

https://www.nzherald.co.nz/nz/rapid-storm-in-auckland-tornado-in-papatoetoe-tears-down-trees-damages-homes/V7F4HDLUKAQ5YE7H5KDM6FSKU4/

[Southern Lad]

https://www.nzherald.co.nz/nz/rapid-storm-in-auckland-tornado-in-papatoetoe-tears-down-trees-damages-homes/V7F4HDLUKAQ5YE7H5KDM6FSKU4/

The 11 June announcement from TWR (giving an update on the financial impact of the Canterbury floods) noted that the assumption was that TWR was now at a large events cost of $14m for the current financial year and therefore the reinsurance cover would kick in. If the announcement is correct and yesterday’s weather event turns out to be a large event, it should be TWR’s reinsurers rather than TWR shareholders that pick up the financial cost.

[aquaman]

The 11 June announcement from TWR (giving an update on the financial impact of the Canterbury floods) noted that the assumption was that TWR was now at a large events cost of $14m for the current financial year and therefore the reinsurance cover would kick in. If the announcement is correct and yesterday’s weather event turns out to be a large event, it should be TWR’s reinsurers rather than TWR shareholders that pick up the financial cost.
Does the reinsurance kick in on a per event basis or per annum basis?

[winner69]

Does the reinsurance kick in on a per event basis or per annum basis?

Don’t know

If they do need this reinsiurance this year helps this years profit but reinsurance premium / cost will only be higher in subsequent years as no doubt premiums based on past claims experience.

[aquaman]

Does the reinsurance kick in on a per event basis or per annum basis?

Just answered my own question...see attached from report if interested

[peat]

yeh Reinsurance is per event.

[winner69]

yeh Reinsurance is per event.

So as the tornado is likely only a 'little event' (insurance wise) no need to call on reinsurance?

[peat]

So as the tornado is likely only a 'little event' (insurance wise) no need to call on reinsurance?

tornados dont cause much damage cf storms or eq's - they are very localised and the video I saw of the Akl one didnt seem any different.

[aquaman]

So as the tornado is likely only a 'little event' (insurance wise) no need to call on reinsurance?

From previous attached chart it appears there are two elements to the reinsurance.
One being for Catastrophe events with cover the steps in after 10m Tower spend and up to 767m cover with also an additional catastrophe cover extending to 812m. I cant find find definition of what constitutes a "catastrophe event"
The second reinsurance cover appears to be for "events" ( would think this excludes BAU claims) that are not catastrophe events with the first 14M spend per annum covered by Tower and then reinsurance stepping up with up to 7.5m per event once Tower has spent 14M per annum and reinsurance covering up to 34m per annum total

BAU claim spend likely excluded from all these figures.

That's my interpretation.

[nztx]

Well I wonder if the wild weekend's weather events in two or 2 & 1/2 regions, counting Wellington & Wairarapa etc has watered down dividend hopes ? ;)

[kiwico]

You would expect a small insurer to have both forms of reinsurance:
* "cat cover" goes up and is based on losses from a single identifiable event causing damage to multiple insureds. The Reserve Bank, as regulator, requires insurers to have cat cover for a 1 in 500 year earthquake (it might now be 1 in 1000 years)
* aggregate R/I would protect an insurer from a higher frequency of non-cat claims, where the number of rats and mice claims during the year exceeds what an insurer wants to hold themselves.

[850man]

You would expect a small insurer to have both forms of reinsurance:
* "cat cover" goes up and is based on losses from a single identifiable event causing damage to multiple insureds. The Reserve Bank, as regulator, requires insurers to have cat cover for a 1 in 500 year earthquake (it might now be 1 in 1000 years)
* aggregate R/I would protect an insurer from a higher frequency of non-cat claims, where the number of rats and mice claims during the year exceeds what an insurer wants to hold themselves.

The below from Tower's website, would appear that costs associated with this flooding event would fall under the reinsurance.

Natural disaster reinsurance costsIn simple terms, reinsurance is insurance for insurance companies. Reinsurance cover helps pay for the cost of claims if there’s a large disaster like an earthquake or major flood. Following the Christchurch earthquakes and other natural disasters both in New Zealand and around the world, there was a significant increase in the cost of reinsurance. This increased cost is reflected in the premiums insurance companies charge their customers.

[winner69]

High risk areas so Tower not likely to have too many customers ……premiums too high.

[Poet]

High risk areas so Tower not likely to have too many customers ……premiums too high.

True, also I believe they have already stated that they have already triggered their aggregate claims limit - $14m (ie all large claims for rest of year, except NZ earthquake, are covered by re-insurance) That is the basis on which they were forecasting the profit ($22m-$24 million so this profit guidance shouldn't be affected.

[Poet]

High risk areas so Tower not likely to have too many customers ……premiums too high.

True, also I believe they have already stated that they have already triggered their aggregate claims limit - $14m (ie all large claims for rest of year, except NZ earthquake, are covered by re-insurance) That is the basis on which they were forecasting the profit ($22m-$24 million so this profit guidance shouldn't be affected.

[Antipodean]

Do you mean the dividend paid last week...?
Or has the dividend payment policy changed recently and I missed it?

Per the update on 11/06/2021, reinsurance is picking up the big event tab, underlying NPAT still forecast at $22-24m, and Jan div still expected to be 2.5-3cps, or 3.4-4.0% gross for the HY based on .735 sp.

Still as we well know guidance can change, so the above is predicated on no further update from the company that surprises the shareholders and the market. Plus not all costs are claim costs, there is going to be a ton of busy people at the company working to resolve customer claims right now.

Flooding is an interesting peril because there is a point where it goes from a sudden unexpected event to a known issue. It wouldn't be outside the realm of possibility for risks that are flood prone or have weather tightness issues to be reviewed post loss. They may not change, but if is becomes expected and frequent, the risk may need to be more fully shared if not remediated while it can be (eg. through a peril specific excess increase).

Still once the waters subside, and the claims are further underway, we will likely get an update from Tower on how this affects their bottom line if at all. Insurance companies exist to pay claims so despite all the above yes it could water down (sorry) the dividend stream (sorry) in the short term. However I'd rather see short term weakness based on paying claims than other factors. For me this is a longer term play seeing if the acquisitions and system turnover pays off 2-5+ years.

[Beagle]

Unfortunately, as per my previous post on this on 18 May, with the ever increasing effects of climate change extremely unusual weather events like the rain affecting Canterbury this weekend are going to be more and more frequent to the point where they become so regular they become normal. Not a good sector in my opinion.

I can't take any credit for this insight as I was very fortunate to have a very loyal client who worked on contract for Metservice for over 50 years. Lovely old chap and the last time I saw him when he retired he told me, don't believe all this one in 100 year weather event nonsense. You'll get at least one, more often two of these so called one in one hundred year weather events every year. He went on and told me some other really scary stuff....basically the amount of methane now being released from ice sheet melting means we are on an irreversible road to catastrophic climate change irrespective of what we do with CO2 emissions. Beagle 30/05/21 https://cage.uit.no/2021/04/28/methane-release-rapidly-increases-in-the-wake-of-the-melting-ice-sheets/

Looks like Maurice was wrong. So called 1 in 100 year weather events seem to be happening almost every month. Too hard to make money in this sector.

Really sad situation https://www.nzherald.co.nz/nz/dead-cows-lining-westport-beach-riverbeds-in-aftermath-of-horror-flooding/BQGDRMXKDBFWYZIZMSUK5YCAUY/

[JohnnyTheHorse]

Looks like Maurice was wrong. So called 1 in 100 year weather events seem to be happening almost every month. Too hard to make money in this sector.

Not a problem if Tower can make sure premiums are priced correctly. Not many players in NZ so consumer will have to pay whatever the cost is. Wouldn't be surprised so see house premiums up 20%+ this year...

[Beagle]

"IF" they can price the annual premiums correctly appears to be the nub of the issue. The pace of change with climate related catastrophe's is what has many climate change activists worried.

[winner69]

Market seems to think Tower impacted with these floods

[KJMLimited]

Don't you mean Matt Goodson at Salt?

[winner69]

Don't you mean Matt Goodson at Salt?

They keep saying good things about Tower ….their largest long

But keep selling …hmmm

[nztx]

They keep saying good things about Tower ….their largest long

But keep selling …hmmm


A bit of sharing the risk going on - you reckon ? ;)

[KJMLimited]

A bit of sharing the risk going on - you reckon ? ;)
I'm looking forward to the off-mkt sale of 29m shares @ 0.68 to clear the overhang.

[nztx]

I'm looking forward to the off-mkt sale of 29m shares @ 0.68 to clear the overhang.


I think I'll hang out on the sidelines watching - given TWR's past history .. :)

[850man]

A bit of sharing the risk going on - you reckon ? ;)

Salt also sold a bunch of PEB, maybe just rebalancing?

[winner69]

Guess next years Tower’s reinsurance premiums will be a lot higher …based on claims experience I’d say

[JohnnyTheHorse]

Guess next years Tower’s reinsurance premiums will be a lot higher …based on claims experience I’d say

Won't be getting their no claims bonus eh?

[850man]

This looks like good news but the wording isn't clear

https://www.nzx.com/announcements/376055

[Balance]

This looks like good news but the wording isn't clear

https://www.nzx.com/announcements/376055

Means reinsurance will only cover up to $7.5m - after that, Tower will take the hit?

[850man]

Means reinsurance will only cover up to $7.5m - after that, Tower will take the hit?

Reads that way. $7.5m in the scheme of this event does not seem significant

[Poet]

Not a very helpful announcement
Do they expect claims to exceed 7.5m or not
Does this mean no more reinsurance available for rest of year
On the face if it seems a strange and inadequate reinsurance arrangement 14m excess and 7.5 m cover
Needs urgent clarification by company

[Beagle]

Guess next years Tower’s reinsurance premiums will be a lot higher …based on claims experience I’d say

Vastly higher I would say and the speed of increase in the rate of so called 1 in 100 year weather events makes this a VERY TOUGH sector.

[Balance]

Reads that way. $7.5m in the scheme of this event does not seem significant

Claims will be in the tens of millions?

[Antipodean]

Specifically says "this event" for $7.5m in the announcement. Too early to forecast claims total costs.

142 claims so far with more expected over the coming days - however the bulk will be there.
If they reach 200 claims say, at $7.5m there is an average of $37,500 per claim coverage which is fine for contents claims, depends if there are house claims (though usually not total loss in these weather events) in the mix.

Means tower can pay a ton of money to customers and recover from reinsurance, building some good will without affecting the bottom line.

[winner69]

I'm looking forward to the off-mkt sale of 29m shares @ 0.68 to clear the overhang.

They better hurry up to get that 68 cents

May have to accept less nextvweek

[Beagle]

Specifically says "this event" for $7.5m in the announcement. Too early to forecast claims total costs.

142 claims so far with more expected over the coming days - however the bulk will be there.
If they reach 200 claims say, at $7.5m there is an average of $37,500 per claim coverage which is fine for contents claims, depends if there are house claims (though usually not total loss in these weather events) in the mix.

Means tower can pay a ton of money to customers and recover from reinsurance, building some good will without affecting the bottom line.

Really ? Slow process on the West Coast as to who is red stickered (complete rebuild) and who is not. How do you make a claim if you're not sure what you're claiming for ?
Plenty more total house rebuild claims will come flooding in over the coming weeks.

How many more so called 1 in 100 year weather events this year ?

[winner69]

Industry in bad light again

Pack of rogues

https://www.newsroom.co.nz/insurance-firms-over-charge-thousands-of-customers-says-review?utm_source=Friends+of+the+Newsroom&utm_campaign=efca39f0dc-Daily+Briefing+22.07.2021&utm_medium=email&utm_term=0_71de5c4b35-efca39f0dc-97970805

[ronaldson]

When TWR updated the Canterbury flooding event in June they had 164 claims and expected a cost of $3m before tax. The recent widespread July event, with emphasis on the West Coast, is 142 claims presently so even if more to come should stay under $7m. In the first Half year the major events were the Ohau Fire and the Napier flood, leading to $9.3m large event costs being booked. The presentation given with the Half Year results said long term average for large events is $8m pa, so while the 20/21 year is shaping to come in at over $14m which is the sum before the reinsurance of $7.5m kicks in it doesn't seem to me likely that $21.5m will be exceeded given TWR has less than 10% of the General Insurance market in NZ unless risk has been significantly concentrated in the localities most seriously affected.