TWR - Tower Insurance.

[KJMLimited]

sorry duplicate post

[KJMLimited]

They better hurry up to get that 68 cents

May have to accept less nextvweek

63 I'd say.

[winner69]

Market maybe thinking the dividend is a goner

Hope the next couple of months weather is fine and dry

[Beagle]

Chart looks pretty ominous. Clear break down below the 100 day moving average line and I am pretty sure that's a slightly lop sided head and shoulders pattern with left shoulder in late February in the late 70's and right shoulder in mid June, again in late 70's. Usually a potender for a steep decline off the right shoulder. Could we see a re-test of the mid 50's area ? Good share to short in my opinion. Glad I didn't fall for all the hype talk at the last Auckland sharetrader gettogether in April when it was in the mid 80's and lots of people were talking it up.

12764

[Antipodean]

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 ?

Very easy to make a claim without all the information, it is standard practice. Claim gets lodged as soon as any loss is expected. Adjustor is appointed, does their thing, bills get paid, repeat as time goes by, settlement comes down the line. Most claims are lodged very quickly in the day of online forms and integrated systems.

Flood claims are very rarely total loss claims.

Definition of 1/100 year events will probably change agree a bit on this front. But even outside of climate change there are years that are heavier than others. That doesn't always change the average over the very long term.

Even if this year is a bad one further events covered under per event section of reinsurance treaty -means bottom line NPAT isn't currently expected to be further changed from earlier announcement as full year impact accounted for already.

Speculate all you want about reinsurance costs but they will be quickly passed on as annual premium adjustments roll through on renewal.

[KJMLimited]

Very easy to make a claim without all the information, it is standard practice. Claim gets lodged as soon as any loss is expected. Adjustor is appointed, does their thing, bills get paid, repeat as time goes by, settlement comes down the line. Most claims are lodged very quickly in the day of online forms and integrated systems.

Flood claims are very rarely total loss claims.

Definition of 1/100 year events will probably change agree a bit on this front. But even outside of climate change there are years that are heavier than others. That doesn't always change the average over the very long term.

Even if this year is a bad one further events covered under per event section of reinsurance treaty -means bottom line NPAT isn't currently expected to be further changed from earlier announcement as full year impact accounted for already.

Speculate all you want about reinsurance costs but they will be quickly passed on as annual premium adjustments roll through on renewal.
That's also how I read it. The real hurdle will come when people can't afford the premiums and/or the TWR's of this world stop offering at all, and banks have to stop lending.

[JohnnyTheHorse]

Chart looks pretty ominous. Clear break down below the 100 day moving average line and I am pretty sure that's a slightly lop sided head and shoulders pattern with left shoulder in late February in the late 70's and right shoulder in mid June, again in late 70's. Usually a potender for a steep decline off the right shoulder. Could we see a re-test of the mid 50's area ? Good share to short in my opinion. Glad I didn't fall for all the hype talk at the last Auckland sharetrader gettogether in April when it was in the mid 80's and lots of people were talking it up.

12764

I am happy to assist you shorting if you're interested :)

Technically we are now in a weekly downtrend, with the break of 71 confirming a weekly bear flag. Significant area of support in 68-70 region, so will be bullish if this holds given a bear flag break just prior (i.e. a breakdown without much follow through). If it breaks that will be significant technical damage.

[nztx]

Can we encourage the Board Squatters to buy a small pile again, so things dont look so bad
& to save the day ? ;)

Wonder if there will be another basically Adrift on the Seas small Insurer looking for a new owner, that can be added
between now & next deferred dividend, to try to resurrect a bit of mana & hope (in place of the dividend) ? ;)

After all, there seem to be quite a few who are happy at throwing more coin at a very deep bottomless well
(or Cap Raise AKA a special variation of a reverse dividend situation) .. before prayer & hope sessions .. ;)

[850man]

I contacted Tower and got a bit more information on reinsurance. They advised the aggregate programme will cover the recent floods up to $7.5m. Should the event ultimately exceed $10m, Tower’s catastrophe programme cuts in. This is reflected in the diagram attached (from page 20 of our half-year results presentation). 12765

[Balance]

I contacted Tower and got a bit more information on reinsurance. They advised the aggregate programme will cover the recent floods up to $7.5m. Should the event ultimately exceed $10m, Tower’s catastrophe programme cuts in. This is reflected in the diagram attached (from page 20 of our half-year results presentation). 12765

Plain language - what does that mean?

Tower is in the hook for only $2.5m?

[winner69]

I contacted Tower and got a bit more information on reinsurance. They advised the aggregate programme will cover the recent floods up to $7.5m. Should the event ultimately exceed $10m, Tower’s catastrophe programme cuts in. This is reflected in the diagram attached (from page 20 of our half-year results presentation). 12765

So it’s all honky dory then …..no change to guidance and dividend still coming

Hope weather plays it part next month

[peat]

agree with JTH current pattern could be bullish
if H+S breaks the shoulder tho..... :cursing:

[winner69]

Irrespective of worrying how much the floods are going to cost Tower or whether there are bullish or bearish patterns on a chart we should as the man from Tower says 'our thoughts are with all those affected by these floods.'

Does seem to be a real mess down there

[nztx]

A fairly damning report on many NZ Insurers here:

https://www.stuff.co.nz/business/125815727/overcharging-poorvalue-policies-identified-in-fma-review-of-house-car-and-contents-insurance-industry

Over-charging, poor-value policies identified in FMA review of house, car and contents insurance industry



Bolingford said: “New Zealanders rely on insurance to protect what they value most. Customers rightly expect to be treated fairly, have their interests properly considered, and have access to products that are fit for purpose.”

She said only two of the 42 house, contents, car, business, travel and health insurers reviewed had done what the FMA had asked of them in the review, which began in 2019.

They were IAG, which owned the State, AMI and NZI brands, and Medical Assurance Society.

The report said several insurers had large-scale remediation activity under way as a result of the review and that would mean refunds for thousands of customers.

Bolingford said it was very hard for customers to understand how their house, car and contents premiums were calculated, so it was disappointing to find insurers’ systems not identifying overcharging.

She gave the example of a couple in their 80s discovering they had been charged double premiums by their insurer for two years, resulting in them overpaying by $800

The FMA did find evidence that some insurers proactively identified overcharging, and fixed it.

“These issues were mostly related to weak systems and processes, poor value and legacy products, and lack of ongoing monitoring of suitability throughout the product lifecycle,” Bolingford said.


more at article link above..

[850man]

https://www.nzx.com/announcements/376349 A bit of good news in an otherwise waterlogged couple of weeks. I'd say Trademe brings Tower quite a bit of business and looks lime more to come.

[Balance]

https://www.nzherald.co.nz/nz/wild-weather-storm-lashes-auckland-evacuations-underway-as-homes-flooded/NGRBKZYIWY3SX6DOBDBE62USCY/

Worse storm to hit West Auckland in history according to councillor.

Wonder if Tower has much by way of insurance in that area.

[Antipodean]

Tower has 9.3% of market, unsure how concentrated that would be in the affected area. Suncorp and IAG form the majority of general cover in NZ (until say the next in line grabs more market share?). Tower has been pretty good recently advising any impact after some time has passed to allow lodgment of claims and the start of the assessment/remediation.

Given Tower are taking a more localised risk based approach, flood zones are something I would imagine they very interested in. There are plenty of records for flood severity and frequency available currently, and being updated. Underwriting responses could be peril based exclusions, higher excesses and/or higher premiums for potentially affected properties. For particularly susceptible risks it even moves into the area of potentially no longer being an unforeseen risk - if there are alleviation options via altering the structure or land.

Even after the event some flood damage can be minimised these days with quick response and heavy duty blowers on site. Carpets dried instead of replaced etc.

[winner69]

Tower might become so risk averse they will get out of property insurance - number of less risky localities seem to be diminishing fast

[Rawz]

Seems to be a 100 year event every half year lately. TWR always battling something

[Beagle]

Seems to be a 100 year event every half year lately. TWR always battling something

I was going to suggest it seems to be every second month.

[winner69]

Bloody heck - another downgrade

So far this year

Last Year profit 28.4m
Said F21 would be about 30m
In May said 25m to 27m
In June said 22m to 24m
and now its 19m to 21m

The year is nearly over so hopefully no more downgrades

And then they can start a story line for F22 ;)

Suppose four big house fires in a week is just bad luck
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/379554/355226.pdf

[sb9]

Bloody heck - another downgrade

So far this year

Last Year profit 28.4m
Said F21 would be about 30m
In May said 25m to 27m
In June said 22m to 24m
and now its 19m to 21m

The year is nearly over so hopefully no more downgrades

And then they can start a story line for F22 ;)

Suppose four big house fires in a week is just bad luck
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/379554/355226.pdf

Back to low 60c or even 50c range by the looks.

[nztx]

Do they Offer Insurance against their Downgrades ? ;)

Investor misadventure in following their Board member's TWR holdings buying antics ? ;)

it may be horrendously expensive premium wise .. ;)

[Getty]

Bloody heck - another downgrade

So far this year

Last Year profit 28.4m
Said F21 would be about 30m
In May said 25m to 27m
In June said 22m to 24m
and now its 19m to 21m

The year is nearly over so hopefully no more downgrades

And then they can start a story line for F22 ;)

Suppose four big house fires in a week is just bad luck
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/379554/355226.pdf

https://youtu.be/iYuldgIOelY

[Rawz]

Bloody heck - another downgrade

So far this year

Last Year profit 28.4m
Said F21 would be about 30m
In May said 25m to 27m
In June said 22m to 24m
and now its 19m to 21m

The year is nearly over so hopefully no more downgrades

And then they can start a story line for F22 ;)

Suppose four big house fires in a week is just bad luck
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/379554/355226.pdf

Once read somewhere downgrades come in three's..

Guess they just sticking to the rules of the investing world.

[Poet]

Bloody heck - another downgrade

So far this year

Last Year profit 28.4m
Said F21 would be about 30m
In May said 25m to 27m
In June said 22m to 24m
and now its 19m to 21m

The year is nearly over so hopefully no more downgrades

And then they can start a story line for F22 ;)

Suppose four big house fires in a week is just bad luck
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/379554/355226.pdf

Jeez, they cant seem to catch a break this year can they?

Anyway, even with three downgrades, still a $20m NPAT on an Enterprise Value (EV) of just $174m (=$274 market cap less $100m cash in bank) so earnings multiple to EV of just 8 and that's in a bad year. They should return that extra cash to shareholders rather than sitting on it at 1% return.

Anyway, a fresh start at the end of this month and lets hope for a better 2022

[Antipodean]

Downgrades are not fun. As noted this is the third and they come in threes so hopefully the last.
4 total loss house fires in the last week is rough - probably makes up a good chunk of $3m it of itself considering how much houses cost to build (plus extra costs to demo costs in fire cases).
While this news is never fun better to find out about it sooner than later.

[Dassets]

Tower gives back $7.2m to customers and says refunding COVID-19 car claim reductions is the right thing to do
Kiwi insurer, Tower, has today confirmed that it will be refunding customers $7.2m, due to the lower cost of car claims during the COVID-19 lockdown period.
Tower CEO, Richard Harding, said that every customer would be refunded part of the car insurance premiums they paid during the level three and four lockdowns.

We’re a Kiwi company and look after our customers, so after seeing a significant reduction in claims, we knew the right thing to do was pass these lower costs on. For most customers, the refund will equate to around 40% to 45% of the car insurance premiums they paid between 24 March and 13 May 2020

This downgrade does not gel. Above is an extract from last year. I always thought it was crazy to give the money back as the company had taken the risk. So with the current ;lock down what is different? Remember the profit should be UP because cars weren't being driven and crashing! Where is the profit? And if it was good last year to not ""insult"" customers hence repayment then why insult them this year.

I am not a current holder but I am very disappointed in what I thought was at long last a turnaround. Shareholders need to know what the heck is going on.

[Getty]

Come back in a years time when one or some of the following events have occurred;

One of NZ's volcanoes relieves its bowels over a wide area.

A tsunami swamps a coastal town, eg Thames, Petone, Whakatane.

A river bursts it banks and floods a city, eg Hastings.

An Earthquake wreaks havoc.

A bush type fire runs through a town, or out of the greenbelt into Wellington.

Tower will have to re name itself Midget.

[winner69]

Come back in a years time when one or some of the following events have occurred;

One of NZ's volcanoes relieves its bowels over a wide area.

A tsunami swamps a coastal town, eg Thames, Petone, Whakatane.

A river bursts it banks and floods a city, eg Hastings.

An Earthquake wreaks havoc.

A bush type fire runs through a town, or out of the greenbelt into Wellington.

Tower will have to re name itself Midget.

Big disaster would be Mt Eden blowing it’s top

[Getty]

Big disaster would be Mt Eden blowing it’s top

And Mt Taranaki is overdue for a spew.

[nztx]

Big disaster would be Mt Eden blowing it’s top


Wouldn't wish that on them given the inherent difficulties seen in getting across
new social rules to some of the thicker examples on the current Mt Covid explosion ;)

I'd hazard a guess that Melbournites would be able handle today's large 6.0 quake there
on top of Covid better than some up north here, even with a bit of Socialist meddling
& tampering thrown in.. probably to help a few with reading lessons for the rules .. ;)

[nztx]

And Mt Taranaki is overdue for a spew.

and the monster hiding at the bottom of the large water filled pit plonk in
the NI centre may be heading for overdue to expel a further cloud of pumice
to clear his throat too .. ;)

No amount of further donations to the guardians & feel good noises is likely to stop dat ;)

[Arbroath]

Back to low 60c or even 50c range by the looks.

If they reach the 50s I’ll happily put 25% off portfolio in TWR.

Have to admit I find it funny that so many on this site are so immature when it comes to investing.

Events happen people. That doesn’t make it a bad company or bad management. If you don’t understand d insurance then sell out and buy something else.

[sb9]

If they reach the 50s I’ll happily put 25% off portfolio in TWR.

Have to admit I find it funny that so many on this site are so immature when it comes to investing.

Events happen people. That doesn’t make it a bad company or bad management. If you don’t understand d insurance then sell out and buy something else.

Yep, that’s the whole point of it. Nothing to do with bad management or being a bad company, not suggesting that. Just unfortunate event of things and bad luck that goes with it.

[Dassets]

Maybe Tower renamed to Small to Medium Ant-Hill rather than midget?

[ronaldson]

97 large house claims for FY21 is obviously higher than expectation, but the major flooding incidents in the Napier, Canterbury and most recently West Auckland will have been major contributors as well as the Ohau Fires. Four total loss fires in the last week could be a reflection of current circumstances? At least MV losses should have been mitigated by the lockdowns so long as past unnecessary generosity is not repeated - insurance has its swings and roundabouts after all!

But what exactly does the announcement mean? The ordinary dividend policy is " 60 - 80% of cash earnings where prudent " and the 2.5c interim dividend cost $10.5m. Underlying net profit is now guided at $19m to $21m so the indicative FY dividend guidance of 5 - 5.5c might now be regarded as unsustainable. I guess a lot will depend on how it is with the historic earthquake claims still carried on the books, and perhaps the prospects for the regulator to release the remaining $25m excess solvency margin still imposed on Tower.

I share the sentiment that it will be good to roll over into the next financial year on 1 October and put this one into the rear view mirror. At least Melbourne seems to have dodged a bullet today!

[winner69]

Way things are going another building covered by Tower?

https://www.rnz.co.nz/news/national/452089/fire-crews-battle-blaze-at-canterbury-s-iconic-sheffield-hotel

[850man]

Way things are going another building covered by Tower

https://www.rnz.co.nz/news/national/452089/fire-crews-battle-blaze-at-canterbury-s-iconic-sheffield-hotel

You know that how?

[Antipodean]

You know that how?
It's pure speculation... some people think 100% of the market is TWR for GI based on responses to news items.

[winner69]

You know that how?

Didn’t say I knew ….said way things are going with Tower their run of bad luck might be continuing

[nztx]

Hey Mr TWR Chair -- How come this fabulous company - Tower which you and possibly
a few of your Board Companions willingly plonked bundles more dosh into shares recently
continues to operate in a certain untoward Manner to make many of us believe that an explosion
originating under your very Chair with loud proclamations "No Material Disasters this time"
and spraying forth a shower of Overdue Dividend sparks is all but impossible ? ;)

Many of us believed that your acclaimed skills suggested certainty to succeeding at recovering golden eggs
from the worst of crashed burnt out wrecks - but alas this TWR ship has been successfully kept afloat,
alive and kicking under your precise careful guidance. However to date, No GOLDEN EGGS have been sighted -
not even the slightest glow off just one, even after the discovery party has finally returned after their earlier
request for their Caps be topped up for the long & dangerous expedition into the unknown .. ;)

[Antipodean]

Well TWR did return to a first dividend payment in 5 years on 29/6/21, flipped total comprehensive profit from red to green 2018-2019, remained green in following year (though smaller).
Also worth noting the 19m lower bound estimate is still going to be higher than any of those years.
Net earned premium has been growing about since 2017 and underwriting profit along with it since 2019.
So this year is a disappointment perhaps compared to the initial FY guidance, but still an upward trend in the long term.

Had a look at some numbers over the weekend.

The fall in NPAT guidance from each step has seen TWR stay at 13-14 P/E each time. Seems the market has its price for now.
From 25m-27m @ ~.87, 22m-24m @ ~.76, and now 19m-21m @ .665.

Forecast eps has dropped from the peak of about 7.0cps to 4.5-5cps.

So given a 2.5c interim dividend has already been paid, and the 60-80% dividend policy (noted in last announcement), I would expect the final dividend to be 1.0-1.5c.
That's not great when looking at some of my sp purchases over the last 6 months, but back further and if I were to be topping up today that is still a 5% gross return in a bad year.

[ronaldson]

Earlier this year it was announced to NZX that on 12 March 2021 Tower paid $14m cash to acquire from ANZ a legacy portfolio of insurance policies for 23k people underwritten by Tower but provided by ANZ and National Bank to their customers between 1990 and 2009, thus avoiding future commissions on those policies and enabling those persons to be migrated to Tower's platforms.

Today, as an ANZ Bank customer but not a policyholder affected by the above transaction, on logon I was messaged an invitation to take up an ANZ motor vehicle insurance policy underwritten by VERO.

Given the former longstanding partnering between ANZ ( and the now subsumed National Bank ) this seems to lack good faith. In fact, I would have thought any sensibly constructed acquisition would have addressed this situation, at the very least a non competition clause for a reasonable period of time. That seems not to be the case, with the result that ANZ is now in active competition with Tower and presumably targeting all those historic policyholders still active customers in common with other existing customers. Given banking relationships are notoriously "sticky" this is still likely to be most of the policyholders transferred to Tower in March.

Another ? mark over ANZ ( there have been many over my time as a customer ) but also over Tower's negotiating skills if this is not a breach of the terms of the original transaction!

[Poet]

Great Result

2.5c per share final dividend and a $30m capital return via compulsory share buyback and cancellation (roughly 8c per share capital return)

Should light a fire under Share price

Microsoft Word - 211108 TWR FY 21 results announcement_DRAFT 5 (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com) (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/383421/360114.pdf)

[bull....]

Great Result

2.5c per share final dividend and a $30m capital return via compulsory share buyback and cancellation (roughly 8c per share capital return)

Should light a fire under Share price

Microsoft Word - 211108 TWR FY 21 results announcement_DRAFT 5 (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com) (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/383421/360114.pdf)

i thought pretty good result and at current prices a 10% gross yield when the imputations come back one day

[Filthy]

big wall up at 70c, hopefully it can smash through it in the next few days. good result. not much in the way of future guidance, but well positioned I think.

[bull....]

the buyback is a positive maybe for increasing divs in the future on a lower no of shares on issue. esp if they can maintain or improve profits

[ronaldson]

The actual result was as signaled by the most recent guidance. A good year to put in the rear vision mirror so far as large claim events is concerned. Confirmation of the 2.5c dividend is welcome but, together with the similar interim dividend, takes $21m which is 100% of the underlying profit.

A few CEQ claims still on foot, clearly the hardest ones. I wonder when/on what basis the excess solvency margin required by the regulator will be released.

The compulsory share buyback is a good move as perhaps the best application of surplus capital, given returns on conservative investments are manifestly poor just now. With the historic capital raise undertaken at a very low subscription rate this company has too many shares on issue currently and a reduction will support higher dividends per share in future which is the only real hope of driving the share price higher.

I have wondered if this company is a potential takeover target. It's financials are now much tidier, the CEQ situation seems under control, it does seem to have the best IT platform by comparison with peers, and has made lots of incremental operational improvements over recent years.

[850man]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/383692/360484.pdf

CEO putting his money where his mouth is, always a good sign

[Sideshow Bob]

Capital Return - Interim Court Orders Received - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/384545)

Capital Return to Shareholders – Interim Court Orders Received

On 24 November 2021 Tower Limited (Tower) announced a proposed NZ$30.4m capital return by way of a Court approved scheme of arrangement.

Tower has received initial orders from the Court to, amongst other things, put the capital return to shareholders at its ASM on 2 February 2022 for their consideration and approval. The scheme is also conditional on Tower obtaining IRD approval that no part of the capital return is in lieu of the payment of a dividend by 9 February 2022.

The scheme will involve Tower’s shareholders:
• having one (1) share cancelled for every ten (10) shares held (together with all rights attaching to those shares) on the record date. Fractions of a share will be rounded up or down to the nearest whole number (with 0.5 rounded down); and
• receiving a cash sum of NZ$0.72 for each share cancelled. Australian registered shareholders will receive these funds in Australian dollars at an exchange rate approved by Tower on or about the record date.

If shareholder and IRD approval is received, Tower intends to seek final orders sanctioning the scheme from the Court. If these final orders are received in late February 2022, payment of the capital return would be made in mid-March 2022. Exact dates will, however, be confirmed closer to the time of payment.
ENDS

[winner69]

Do Tower insure boats …like the sad looking ones in Tutukaka Marina

[KJMLimited]

I dunno. Act of God clauses may apply maybe. My knowledge is a bit skinny on that though.

[Antipodean]

Tower does have boat insurance. This kind of disaster is highly likely to be claimable - this is what insurance is for. Cannot see any reference to Act's of God in actual NZ insurance wording.

Note that from what I understand Tower boat insurance is NZ only.
Though their home/contents policies under Tower pacific may have some claims from recent events.
Unsure what scale that will be but should have some update when more is known.

I expect it is unlikely to be on the same scale as the house fires from last year as sadly house construction in NZ is insanely expensive relative to the pacific, but all speculation at this point.
Noting that late last year forecasts for FY22 assume a full use ($20m) of large scale event coverage of their own through re insurance.. check out slide 25 from announcement 21/11/2021.
So market might be spooked by this in the short term but long term not a scale event for Tower I expect.

Also something I'm noting is that Monday is the last day to buy twr with 2.5c dividend included which at $.715 is a 3.5% gross return for the half year not too shabby, plus a buyback coming up.

[ronaldson]

Update on Tonga Eruption and Tsunami event provided to NZX this morning. Seems around 2500 policyholders in Tonga. Inferentially, claims may be up to the $11.25m reinsurance excess for large events. No comment on possible boat claims arising from the Tutukaka Harbour surges.

[Sideshow Bob]

Capital Return to Shareholders - IRD Approval Received - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/386698)

CAPITAL RETURN TO SHAREHOLDERS – IRD APPROVAL RECEIVED
On 24 November 2021 Tower Limited (Tower) announced a proposed NZ$30.4m capital return by way of a Court approved scheme of arrangement.
Tower has received notice from the IRD that no part of the capital return is in lieu of the payment of a dividend. As such the Scheme is now conditional on shareholder approval at the ASM today and final orders sanctioning the scheme from the Court. If these final orders are received in late February 2022, payment of the capital return would be made in mid-March 2022, assuming the capital return is approved by shareholders at the ASM today. Exact dates will, however, be confirmed closer to the time of payment.
The scheme will involve Tower’s shareholders:
• having one (1) share cancelled for every ten (10) shares held (together with all rights attaching to those shares) on the record date. Fractions of a share will be rounded up or down to the nearest whole number (with 0.5 rounded down); and
• receiving a cash sum of NZ$0.72 for each share cancelled. Australian registered shareholders will receive these funds in Australian dollars at an exchange rate approved by Tower on or about the record date.
ENDS

[Sideshow Bob]

Tower Provides Business Update, Reconfirms Guidance - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/386697)

Kiwi Insurer, Tower Limited (NZX/ASX: TWR) today holds its Annual Shareholder Meeting and reconfirms its full year guidance.
Tower continues to grow while navigating a challenging environment

In the three months to 31 December 2021, Tower recorded $112 million gross written premium (GWP), representing growth of 12% on the same period last year.

Customer numbers grew by 6,000 over the first quarter to 310,000, an increase of 24,000 customers year-on-year. My Tower registrations also increased, with 150,000 customers now registered for the online service, up from 50,000 in the same period last year.

Blair Turnbull, Tower CEO, says Tower’s focus on supporting customers and delivering on its technology and distribution growth strategies has led to a good start to the 2022 financial year.

“This result has been driven by a combination of improved customer retention and new business, as well as inflation-based rating adjustments. Lower than expected motor and large house claims, as well as fewer severe natural events have also contributed towards a solid first quarter performance,” he says.

Tower continues to actively manage inflationary pressure on claims costs and Covid-related supply chain issues which began challenging the insurance industry in 2021 and are expected to continue throughout 2022.

The actions taken to address these external factors have allowed Tower to maintain a claims ratio of 47%, excluding large events, which is consistent with the same period last year. Disciplined cost control has seen management expenses remain consistent with the prior year at 38%.

Guidance reconfirmed
There is no change to Tower’s FY22 underlying net profit after tax (NPAT) guidance range of $21m to $25m, noting that this guidance assumes inflation pressures will continue throughout FY22 and that the $20m excess on Tower’s aggregate reinsurance is fully utilised.

Supporting Tonga’s recovery
Tower is still assessing the impact of the significant eruption of underwater volcano Hunga-Tonga-Hunga-Ha’apai and subsequent tsunami in Tonga and surrounding areas.

Mr Turnbull says, “Tower has been in the Pacific for almost 150 years and remains committed to our Pacific communities. Tower plans for such events and, alongside our robust reinsurance programme that underpins our resilience, we are in a strong position to continue to support our customers throughout Tonga’s recovery.”

Tower’s reinsurance programme provides up to $873m of cover for catastrophe events. Its reinsurance excess for such events is $11.25m which is within the $20m Tower has allowed for large events in FY22.

Financial information provided in this update is based on Tower’s unaudited management accounts as at 31 December 2021. Tower’s results for the half year ending 31 March 2022 will be released in May 2022.
ENDS

[Beagle]

Got my renewal notice for my car insurance premium from Tower last week. Insurance premium up by 27% with no claims and no explanation whatsoever regarding the increase. Not a single word to explain it.

I think what's grinding my gears the most though is that its well known that people have driven a lot less this last year with the extended lockdown (107 days in Auckland) which should have lead to a lot lower claims which is wholly unsupportive of such a substantial increase. Further, a family member in the panel beating industry tells me that the hourly rate insurance companies pay has not increased for many years which is leading to a crisis in the industry of retaining qualified staff.

Maybe they think old dog's are less attentive and now I'm 60 despite decades of no accidents they think I'll go wandering off the road in a daze lol.

It feels like I'm being overcharged so I shopped around a bit but couldn't find a better deal. ~$750 for a $40K car with a $1K excess seems like a lot. Wonder how much of that $750 goes in overheads, office leases, staff and profit, maybe $300-$400 ? Thinking about self insuring as a matter of principle because the premium seems excessive.

Anyone else drive around in a reasonable car and not have insurance ?

[SPC]

Problem is Beagle it's not really about covering the damage to your own vehicle ( and the less worth your vehicle has the better ie. 2 reliable cars worth less than 5k each so full redundancy vs 40k rapidly depreciating whatever) but your public liability if you hit someone or something else. Think a nasty lawyers Porsche, power pole, transformer, roadside infrastructure etc. That's where uninsured have no protection and others seeking to recover their costs are totally merciless (i.e insurers). How deep are your pockets if Vector et al hit you up for a transformer?.
3rd party isn't worth the saving as you have costs dealing with your own roadside wreckage and cleanup.

[850man]

Got my renewal notice for my car insurance premium from Tower last week. Insurance premium up by 27% with no claims and no explanation whatsoever regarding the increase. Not a single word to explain it.

I think what's grinding my gears the most though is that its well known that people have driven a lot less this last year with the extended lockdown (107 days in Auckland) which should have lead to a lot lower claims which is wholly unsupportive of such a substantial increase. Further, a family member in the panel beating industry tells me that the hourly rate insurance companies pay has not increased for many years which is leading to a crisis in the industry of retaining qualified staff.

Maybe they think old dog's are less attentive and now I'm 60 despite decades of no accidents they think I'll go wandering off the road in a daze lol.

It feels like I'm being overcharged so I shopped around a bit but couldn't find a better deal. ~$750 for a $40K car with a $1K excess seems like a lot. Wonder how much of that $750 goes in overheads, office leases, staff and profit, maybe $300-$400 ? Thinking about self insuring as a matter of principle because the premium seems excessive.

Anyone else drive around in a reasonable car and not have insurance ?

Looked at 3rd party fire and theft coverage as opposed to fully comprehensive?

[Beagle]

Looked at 3rd party fire and theft coverage as opposed to fully comprehensive?

Yeah worked out about half.

Got two other quotes...both more than Tower. I guess it is what it is, yet another cost that's risen heaps more than the theoretical rate of inflation of 5.9%.

[Davexl]

Yeah worked out about half.

Got two other quotes...both more than Tower. I guess it is what it is, yet another cost that's risen heaps more than the theoretical rate of inflation of 5.9%.


Yeah - Life's a bitch but you can afford it Beagle...:)

On another note, anyone know when the Record date is for the Capital return or is this yet to be decided ? TIA

[Perky]

If you owned TWR shares you would of got a dividend today. You have already proved their quote was competitive.
Buy enough Shares to cover the annual premium and relax. If you crash your car enough you could increase the head share price as well…win/ win LOL

[850man]

Yeah worked out about half.

Got two other quotes...both more than Tower. I guess it is what it is, yet another cost that's risen heaps more than the theoretical rate of inflation of 5.9%.
Whenever I have shopped around Tower (or Trademe, same company in the end) have always been cheapest. They are allowing for the higher cost of building and the storm events now in premiums.

[Perky]

@davexl

Tower has received notice from the IRD that no part of the capital return is in lieu of the payment of a dividend. As such the Scheme is now conditional on shareholder approval at the ASM today and final orders sanctioning the scheme from the Court. If these final orders are received in late February 2022, payment of the capital return would be made in mid-March 2022, assuming the capital return is approved by shareholders at the ASM today. Exact dates will, however, be confirmed closer to the time of payment.

[Davexl]

@davexl

Tower has received notice from the IRD that no part of the capital return is in lieu of the payment of a dividend. As such the Scheme is now conditional on shareholder approval at the ASM today and final orders sanctioning the scheme from the Court. If these final orders are received in late February 2022, payment of the capital return would be made in mid-March 2022, assuming the capital return is approved by shareholders at the ASM today. Exact dates will, however, be confirmed closer to the time of payment.

Thanks Perky, just thought they might have already announced it for some reason...

[Balance]

https://www.rnz.co.nz/news/national/460749/state-of-emergency-declared-as-heavy-rain-moves-up-west-coast

Another 1 in 50 year event?

[Beagle]

Whenever I have shopped around Tower (or Trademe, same company in the end) have always been cheapest. They are allowing for the higher cost of building and the storm events now in premiums.

Yes...all these so called 1 in 100 year weather events that seem to happen several times a year.

[bull....]

nice update , rising rates should improve there investment income figure from the measly figure before going forward.
one of the few i still own on the nzx
bit undervalued looking ahead in my opinion following the cap return and future cap returns and rising divs

[ronaldson]

The indicative record date to be eligible for the return of capital is Friday 4 March 2022. If the final court orders have not been made by 25 February the record date will be five business days after the date on which the final orders of the High Court sanctioning the scheme are made. Now that the IRD determination that the capital return will not be treated as a dividend has been received I think it very unlikely High Court sanction will not occur on 25 February.

The indicative payment date to shareholders is Friday 18 March 2022.

I have wondered if the Regulator could amend its stance and oppose the granting of the court orders pending greater clarity on Tonga costs, which must be highly uncertain just now. It's not the excess of $11.25m that would be the worry but the potential for the aggregate of claims to exceed the reinsurance cap. That is what caught Tower and other insurers out in the ChCh events and caused all the angst.

[Poet]

The indicative record date to be eligible for the return of capital is Friday 4 March 2022. If the final court orders have not been made by 25 February the record date will be five business days after the date on which the final orders of the High Court sanctioning the scheme are made. Now that the IRD determination that the capital return will not be treated as a dividend has been received I think it very unlikely High Court sanction will not occur on 25 February.

The indicative payment date to shareholders is Friday 18 March 2022.

I have wondered if the Regulator could amend its stance and oppose the granting of the court orders pending greater clarity on Tonga costs, which must be highly uncertain just now. It's not the excess of $11.25m that would be the worry but the potential for the aggregate of claims to exceed the reinsurance cap. That is what caught Tower and other insurers out in the ChCh events and caused all the angst.

There are a total of 66 claims for the Tonga event, and a few of those will be vehicles rather than properties - it won't go anywhere near the $870 million re-insurance cap. There was also one claim at Tutukaka for a boat.

After the approx 10% capital return there will be 10% fewer shares on issue and no decrease in the expected dividend payment, so actually an increase in the dividend per share (probably 5.5 c this year cf 5c last year, so what's not to like?)

[ronaldson]

Thanks Poet - you seem to have information that I was unaware, albeit claims will not all be in at this stage and these events seem to have the potential for a long tail ( and no EQC in the Islands so the underwriter is liable for the entire claim less the policy excess ). I would have asked some questions at today's AGM, but was committed to minding grandchildren not yet back at school.

Something that interests me is what are the criteria to be met for the Regulator to lift the condition requiring maintenance of the remaining $25m of excess capital, and also whether any other insurers in NZ are under a similar requirement arising from the ChCh earthquakes to maintain excess capital ie whether Tower is being singled out in this respect and at this distance in time, given other insurers will also have a number of residual unsettled claims, in some cases in greater number than Tower. However those entities are not NZX listed, so a lack of transparency.

I understand your comments regarding the future effect of the capital return, and acknowledge that the decision to reduce the number of shares on issue is likely to be the best deployment of the cash sum involved.

[Poet]

Thanks Poet - you seem to have information that I was unaware, albeit claims will not all be in at this stage and these events seem to have the potential for a long tail ( and no EQC in the Islands so the underwriter is liable for the entire claim less the policy excess ). I would have asked some questions at today's AGM, but was committed to minding grandchildren not yet back at school.

Something that interests me is what are the criteria to be met for the Regulator to lift the condition requiring maintenance of the remaining $25m of excess capital, and also whether any other insurers in NZ are under a similar requirement arising from the ChCh earthquakes to maintain excess capital ie whether Tower is being singled out in this respect and at this distance in time, given other insurers will also have a number of residual unsettled claims, in some cases in greater number than Tower. However those entities are not NZX listed, so a lack of transparency.

I understand your comments regarding the future effect of the capital return, and acknowledge that the decision to reduce the number of shares on issue is likely to be the best deployment of the cash sum involved.

I'm not sure what regulator conditions are re the $25m but I think that this is a moot point given that their self-imposed liquidity margin seems to be above this figure


The 66 claims were mentioned at the ASM today as was the one boat at Tutukaka, and yes, maybe more claims to come, but overall no threat to total re-insurance cover. In actual fact the underlying message from the chairman today was to lament the low rate of insurance cover in the pacific islands and to call for a co-ordinated effort to increase this. TBH, I was on tenterhooks while he was talking fearing that he was about to announce that Tower was going to make some charitable gesture to the uninsured (ala the $6m return of car insurance premiums in the first covid lockdown) - fortunately, he didn't do this. I think the saving grace at tower just now is the influence of 19.9% shareholder Bain capital that seem, as an activist shareholder, to be exerting some pressure to ensure efficient capital management and discipline

[bull....]

towers pacific business roughly around 19% of total gwp revenue and of that 19% tonga maybe 4-5% gwp so agree with poet probably not going to be a catastrophe for tower

[850man]

TBH, I was on tenterhooks while he was talking fearing that he was about to announce that Tower was going to make some charitable gesture to the uninsured (ala the $6m return of car insurance premiums in the first covid lockdown) - fortunately, he didn't do this.

you and me both! That gesture was a bit of a punch in the face to shareholders and I've not seen any information to suggest any long term benefits were derived from it.

[Beagle]

There are a total of 66 claims for the Tonga event, and a few of those will be vehicles rather than properties - it won't go anywhere near the $870 million re-insurance cap. There was also one claim at Tutukaka for a boat.

After the approx 10% capital return there will be 10% fewer shares on issue and no decrease in the expected dividend payment, so actually an increase in the dividend per share (probably 5.5 c this year cf 5c last year, so what's not to like?)

If you bring up a five year chart this has been an appalling investment having been around $1 five years ago. Its common knowledge that climate change is causing increasingly extreme weather events so I am not sure on a 5 year time horizon the next five years will be any better than the last. In fact the distinct possibility it could be worse or even much worse with ever more extreme weather events on a more regular basis caused by the increasingly severe effects of global warming is definitely something I foresee as being quite likely.

Worse, I went on to Microsoft Money and brought up a 22 year chart from the year 2000 when it was ~ $3.20 and this has basically been in systemic decline for decades. I put it to you and others that this company is basically a wealth destroyer.

The only case to invest that I can see is the dividend yield but it would be most imprudent to not consider the potential for further capital destruction.

Sorry, you asked and you know I always call it as I see it. GLTAH

[Antipodean]

Past performance is no guarantee of future results... cuts both ways.
If your analysis indicates this is the same company of 2016, 2011, 2001, then yes I would avoid.

If you look at the transformation program of this company in the last several years and believe this will come with future benefits, there is a case there for a current investor.
It is still somewhat risky as not all advised transformations succeed, and an investor should price and note risk accordingly.
Early fundamental signs for me are positive, but there is still long time to regain market trust.

In relation to climate change, yes an increase in expected EWE's is there. Good insurance companies historically adapt to whatever the changing paradigm is with a mix of direct per policy actions (targeted excesses, premium loadings), book actions (premium rating, underwriting) and company actions (reinsurance treaties). Those companies that do the large numbers remain profitable in changing circumstances over the long run. It shouldn't matter what the change is, even if 1 in 50 year events become 1 in 5 year events, the law of large numbers and a proactive response can handle this.

Overseas companies have performed this trick to remain profitable in shifting times. Will Tower follow? Time will tell.

[Poet]

Past performance is no guarantee of future results... cuts both ways.
If your analysis indicates this is the same company of 2016, 2011, 2001, then yes I would avoid.

If you look at the transformation program of this company in the last several years and believe this will come with future benefits, there is a case there for a current investor.
It is still somewhat risky as not all advised transformations succeed, and an investor should price and note risk accordingly.
Early fundamental signs for me are positive, but there is still long time to regain market trust.

In relation to climate change, yes an increase in expected EWE's is there. Good insurance companies historically adapt to whatever the changing paradigm is with a mix of direct per policy actions (targeted excesses, premium loadings), book actions (premium rating, underwriting) and company actions (reinsurance treaties). Those companies that do the large numbers remain profitable in changing circumstances over the long run. It shouldn't matter what the change is, even if 1 in 50 year events become 1 in 5 year events, the law of large numbers and a proactive response can handle this.

Overseas companies have performed this trick to remain profitable in shifting times. Will Tower follow? Time will tell.

Good thoughts, that's also the way I see it.
A retail insurer should basically just be regarded as the 'middle man' clipping the ticket between a re-insurer and the retail client (while also, of course, providing front office facilities and claims management.) Let's put aside the one-off 2011 events where the level of re-insurance cover and was very badly matched to the level of retail cover being provided.
As the world gets more risky from climate change etc, the opportunities for an insurance ticket clipper get bigger not smaller.

[freddagg]

Don't take Beagle too seriously, he is probably buying them.

[nztx]

Don't take Beagle too seriously, he is probably buying them.


I wondered who was snapping up the ones I didn't want .. so it wasn't the Trev's after all .. ;)

[Beagle]

Don't take Beagle too seriously, he is probably buying them.

No...no interest whatsoever. Last time we had a sharetrader meeting in person down at the Viaduct in April 2021 these came in for a lot of chit-chat and some there, actually quite a few were really, really enthused, the dog notably not among them. They were 85 cents at the time and all the talk was they were going over $1 really soon. I just sat there quietly quaffing down the oysters and sipping on my drink thinking this has been an entirely unrewarding company for so long now why would it be any different in the future ?. Nobody really wanted to hear the dog's cynicism towards the company and the sector then and it seems nothing has changed. Companies either produce results or they produce excuses. I am sure they will spin many a convincing yarn that going forward its going to be different this time...could I please have a Tui to go with that ;)

[Rawz]

No...no interest whatsoever. Last time we had a sharetrader meeting in person down at the Viaduct in April 2021 these came in for a lot of chit-chat and some there, actually quite a few were really, really enthused, the dog notably not among them. They were 85 cents at the time and all the talk was they were going over $1 really soon. I just sat there quietly quaffing down the oysters and sipping on my drink thinking this has been an entirely unrewarding company for so long now why would it be any different in the future ?. Nobody really wanted to hear the dog's cynicism towards the company and the sector then and it seems nothing has changed. Companies either produce results or they produce excuses. I am sure they will spin many a convincing yarn that going forward its going to be different this time...could I please have a Tui to go with that ;)

Lol Beagle.. you are a very good raconteur

[Antipodean]

While it is nice that others share your opinion, contrary opinions are very useful, particularly when it is a stock you own or are acquiring.
Nothing worse than living in a complete echo chamber for losing money.
Tower is certainly not a safe bet at this stage will take consistent results for them to make this a turn around story.

[winner69]

From BusinessDesk. Probably paywalled and they’ll shoot me for posting so do the decent thing and take out a sub

https://businessdesk.co.nz/article/on-the-money/on-the-money-rob-fyfe-why-well-miss-david-darling-michael-stiassny-and-more

Tower shareholders Stephen and Helen Burt have seen a lot since they bought into the insurer’s 1999 initial public offering when it was demutualised.

That’s ranged from hocking off assets until it was just a general insurer, to deeply discounted share sales to prop up the firm’s, at times, shaky balance sheet.

“Throughout this time, we've seen a plethora of questionable capital and business restructuring initiatives, these often involving expensive, unnecessarily deeply discounted underwritten capital raising arrangements, often by parties associated with differing shareholder interests,” they said at this week’s virtual annual meeting.

So On the Money was somewhat bemused to hear their objections to the “relatively minor” $30m share buyback as they urged Tower’s board to be “more aspirational” in their quest to invest and grow the business.

It’s not often local shareholders grumble about getting their own money back, but OTM accepts it’s tough out there finding a home for spare funds when rapidly accelerating inflation threatens to devalue all and sundry, and the Burts said they’re probably going to reinvest those funds back into Tower, which was trading at a yield of 7.1% earlier this week.

The general insurer hasn’t been short of ideas on how to put money to work, investing heavily in its digital platforms and snapping up customer books of ANZ and Youi in recent years.

Alas, chairman Michael Stiassny took the Burts’ complaint on the chin, lamenting that Tower’s “sad position” left the board with no option but to return capital to shareholders.

“We could not, and I can assure you we looked under many stones and rocks, find investments that meet the hurdles and criteria we wanted for you and for the company,” Stiassny said.

Given the trials and tribulations the Burts have seen over the years, OTM can think of much worse last resorts.

[Beagle]

Interesting story Winner, thanks for sharing. As I said earlier this week the shares were $3.20 in 2000 and on the reserve bank inflation calculator website, forgetting about any growth, in real inflation adjusted terms the shares should be $5.22 today to have simply maintained their real value.
Bringing up a long term chart of this company, subject to wide swings around the trendline, it has basically been in a downtrend ever since.

[Balance]

Tough sector to invest in with all the once in 50 years and 100 years events happening every year?

https://www.nzherald.co.nz/business/floods-and-fires-push-up-claims-for-parent-of-vero-aa-insurance/LVNM5DSCRUXMY6V3SBKIGUA7JE/

High natural hazard claims, rising costs due to supply chain constraints and low investment returns has dragged down the profits of the New Zealand arm of insurer Suncorp.

The ASX-listed company which owns Vero Insurance, Asteron Life, and has a joint share in AA Insurance with the New Zealand Automobile Association, saw its net profit fall 34.9 per cent to $84 million for the six months to December 31.

[Poet]

Tough sector to invest in with all the once in 50 years and 100 years events happening every year?

https://www.nzherald.co.nz/business/floods-and-fires-push-up-claims-for-parent-of-vero-aa-insurance/LVNM5DSCRUXMY6V3SBKIGUA7JE/

High natural hazard claims, rising costs due to supply chain constraints and low investment returns has dragged down the profits of the New Zealand arm of insurer Suncorp.

The ASX-listed company which owns Vero Insurance, Asteron Life, and has a joint share in AA Insurance with the New Zealand Automobile Association, saw its net profit fall 34.9 per cent to $84 million for the six months to December 31.

Not really all that tough...

That $84 million represents a net profit of just over 8% of premium income. IMO - it's a pretty sweet lark if you can make those profits in an environment with all of those headwinds they are describing. And you can bet they will use those headwinds to justify steep premium increases going forward

[Davexl]

Not really all that tough...

That $84 million represents a net profit of just over 8% of premium income. IMO - it's a pretty sweet lark if you can make those profits in an environment with all of those headwinds they are describing. And you can bet they will use those headwinds to justify steep premium increases going forward

Given that Retail insurers are just a middleman, and the sheer pricing power of an insurer (you have to have it), insurers will always be making money, even in an inflationary environment. Good hedge IMO...

[ronaldson]

Tower falling behind on indicative dates for capital return?

After meeting the indicative dates for shareholder approval, and IRD confirmation that the proposed return of capital would not be treated as a dividend, there has been no announcement that the Final High Court Orders expected by 25 February have been obtained despite these being usually in the nature of a " rubber stamp " in such circumstances.

The intended record date of 4 March for holders to participate can still be met, but delay in achieving the Orders is unusual.

[Antipodean]

The indicative date from release 24/11/2021 of 25th February was only last Friday.
So only a one and a bit business days since they expected it in their hands.

They also may or may not stick to indicative payment date of 18th March - so maybe they are confirming all is in line on that front prior to the final announcement?
I probably wouldn't worry until later in the week.

In the meantime (assuming it does go through sooner or later), possibly a good time to top up and take a quick win on the capital return @ 72cps while the market price is roughly 3% less than this.

[Antipodean]

Not to worry... announcement now out.

Last day to be in 4th March (this Friday), TH, record 8th March, trading resumes 9th March, payment on or before 22 March.

[ronaldson]

I note the " Diary Adjustments " paging, at least on the DB website, does not presently reflect the timetable now published for the Capital Return. That should be corrected.

[hogie]

Excuse my ignorance but what exactly does this "Capital Return" actually mean for Shareholders?

[Gerald]

Excuse my ignorance but what exactly does this "Capital Return" actually mean for Shareholders?


For every 10 shares you own, 1 is taken off you and you are paid $0.72. The remaining 9 shares should then have a slightly larger value as there are less shares on issue, but the future profits Tower is expected to make is unchanged. And the dividend might increase to say 5.5c since there are less shares.

I don't think they could do a buyback since Bain has 20% and this would have thrown them over which would have some complications? (I may be wrong)

[Antipodean]

The capital return is not optional so all holders (including Bain) would remain owning the same % of the company as they did prior (as all holdings are -relatively to others - unchanged)

[Antipodean]

The capital return shares have been cancelled and the money returns to holders this week.
Question for me... how does this look now for further investment and how does this affect the guidance issued in February?

There are now 379,483,987 shares on issue compared to 421,647,258 prior.

Guidance wise most recent is on 2/22/2022... "no change to Tower’s FY22 underlying net profit after tax (NPAT) guidance range of $21m to $25m, noting that this guidance assumes inflation pressures will continue throughout FY22 and that the $20m excess on Tower’s aggregate reinsurance is fully utilised."

So taking 21m - 25m NPAT assuming full usage of reinsurance (though only Tonga event seems to be relevant for the moment), .705 share price, and 379,483,987 shares on issue.
Gives us a the following:
EPS of 5.5 - 6.6 cps,
P/E of 12.7 - 10.7,
Dividends paid of 60-80% of NPAT gross yield of 6.6 - 7.5%.

If you added 8.75m (difference of 20m reinsurance excess and 11.25m max single event usage) to the top end you have potential surprise to the upside of
EPS 8.9 cps,
P/E 7.9,
Dividends paid of 60-80% of NPAT gross yield of up to 10.1%

Though this last scenario is highly optimistic and Tower is yet to deliver on a surprise to the upside.
Still risky this one but potential for the turn around remains.

[ronaldson]

Update for the Tonga eruption and tsunami provided - 288 claims to date estimated to cost $7.6m or just over $26k per claim suggesting most are MV/Contents rather than Commercial/Residential buildings. I guess to be deemed insurable in that environment/location structures must meet full building code standards so fewer are covered notwithstanding the actual extent of devastation.

Cyclone Dovi in North Is in February has cost $3.6m based upon 762 claims to date. AIG are already reporting a large number of claims from the heavy rainfall of the past few days and Tower will not be immune. While the overall $20m allowance by Tower for large events in the current financial year, now almost half elapsed, is not yet truly threatened it does seem these happenings are increasingly frequent and the prospect of a " good " year where some/all of the allowance can default to the bottom line at year end seems increasingly distant!

[hogie]

Update for the Tonga eruption and tsunami provided - 288 claims to date estimated to cost $7.6m or just over $26k per claim suggesting most are MV/Contents rather than Commercial/Residential buildings. I guess to be deemed insurable in that environment/location structures must meet full building code standards so fewer are covered notwithstanding the actual extent of devastation.

Cyclone Dovi in North Is in February has cost $3.6m based upon 762 claims to date. AIG are already reporting a large number of claims from the heavy rainfall of the past few days and Tower will not be immune. While the overall $20m allowance by Tower for large events in the current financial year, now almost half elapsed, is not yet truly threatened it does seem these happenings are increasingly frequent and the prospect of a " good " year where some/all of the allowance can default to the bottom line at year end seems increasingly distant!


No doubt a lot of vehicle damage claims from yesterday too ... quite a few cars in my work carpark filled up with water (I narrowly escaped before mine breached!).

[nztx]

Chip chip chipping away at the next reporting period's profit & dividend ? ;)

Might need to add another portfolio of policies onboard to help mitigate or
expand the exposures ... whichever you like ? ;)

Then some more large IT expenditure needed to handle a further infulx of policies ? :)

Can't look at only a half tower full of these curious things can we - when only a full
Tower is expected ;)

[Beagle]

Narrowly escaped a flood at our place yesterday. Most rain in one hour I had ever seen yesterday morning. I was out in the middle of it unblocking gutters in the spouting and clearing drains on our deck. I got absolutely saturated. These so called one in one hundred year events seems to be happening every few weeks. Who'd own an insurance company with every increasingly wild weather caused by climate change :eek2:

[Joshuatree]

I cleaned our gutters the day before ;)but we didn't get that much rain atp.Strong winds for a while.Feel for homes and business's who got flooded.

[Arbroath]

Narrowly escaped a flood at our place yesterday. Most rain in one hour I had ever seen yesterday morning. I was out in the middle of it unblocking gutters in the spouting and clearing drains on our deck. I got absolutely saturated. These so called one in one hundred year events seems to be happening every few weeks. Who'd own an insurance company with every increasingly wild weather caused by climate change :eek2:

It’s a fair point but also remember premium rises come into the equation. In 3 years my home and contents premiums are up 23% and my commercial car cover just went up 9% this week.

A broader issue will become people under insuring as they try to save money on cover as all the inflation/cost of living issues drag on.

[bull....]

severe flooding in gisborne ... more claims coming

[winner69]

No doubt a lot of vehicle damage claims from yesterday too ... quite a few cars in my work carpark filled up with water (I narrowly escaped before mine breached!).

Don't know much about cars but I did read that after a flood most cars that get submerged tend to get written off because of water in the electrics and brakes and airbags are expensive to fix. No doubt all part of Towers risk assessment

[Scrunch]

Narrowly escaped a flood at our place yesterday. Most rain in one hour I had ever seen yesterday morning. I was out in the middle of it unblocking gutters in the spouting and clearing drains on our deck. I got absolutely saturated. These so called one in one hundred year events seems to be happening every few weeks. Who'd own an insurance company with every increasingly wild weather caused by climate change :eek2:

Because every story like this reminds people that insurance on what is often their most valuable asset is essential service because they can't take the risk of loss that insurance avoids. The vast majority of people will cut other costs before they risk going uninsured on their house/contents. Its a good business to be in where customers prioritise the product the sector is selling.

Yes some risk probabilities are changing so your statement is better phrased as "who'd own a dumb insurance company that assumes insurance claim rates will return to historical levels despite increasingly wild weather caused by climate change" and the answer to that is only a fool because that business model is problematic. A smart insurance company is however a different proposition because they are correctly pricing the level of current (1yr forward) risk into their premiums and making a profit at the premium that is set. Tower's share price indicates the jury is still out on whether they fall into the smart or dumb category, but some past decisions and the current share price is leaning towards the dumb category. If the market starts to swing towards the smart category then there's some really strong share price gains to be made. Tower have made a lot of system and process changes over the last 5+ years meaning there is a distinct chance they are transitioning from the dumb to smart category. What the market needs for a re-rate is delivery of results, not just missed profit targets.

[Beagle]

Because every story like this reminds people that insurance on what is often their most valuable asset is essential service because they can't take the risk of loss that insurance avoids. The vast majority of people will cut other costs before they risk going uninsured on their house/contents. Its a good business to be in where customers prioritise the product the sector is selling.

Yes some risk probabilities are changing so your statement is better phrased as "who'd own a dumb insurance company that assumes insurance claim rates will return to historical levels despite increasingly wild weather caused by climate change" and the answer to that is only a fool because that business model is problematic. A smart insurance company is however a different proposition because they are correctly pricing the level of current (1yr forward) risk into their premiums and making a profit at the premium that is set. Tower's share price indicates the jury is still out on whether they fall into the smart or dumb category, but some past decisions and the current share price is leaning towards the dumb category. If the market starts to swing towards the smart category then there's some really strong share price gains to be made. Tower have made a lot of system and process changes over the last 5+ years meaning there is a distinct chance they are transitioning from the dumb to smart category. What the market needs for a re-rate is delivery of results, not just missed profit targets.

Well said. I guess the risk is that in the process of trying to reprice and actuate policy pricing strategies that more correctly reflect the risks you're going to lose some customers along the way. I'm a good case in point as the annual renewal of my car came in at 25% more this year than last, despite the 107 day lockdown in Auckland meaning I drove considerably less distance than normal. This is on top of a 15% price increase the previous year which was also a year in which many drivers were on the road a lot less.

I quizzed them about the size of the increases in the circumstances and got a carefully curated long winded response that had obviously been well put together and cut and pasted from previous communications. It went on and on about sharing the risk from a community based perspective and was clearly designed to get an emotional response that yeah, being part of the community involves sharing risk with the community. This all read very well and was more than a little soothing BUT It ended by saying I could save $XYZ (about 12% from memory) by eliminating cover on my vehicle for any driver under 25 years old.

All this did was further annoy me because it made me realise that they had never explained this option to me before and as I have never allowed anyone under 25 to drive any vehicle I have owned in more than a decade since the kids left home I have been overpaying for many years, all through a lack of proper disclosure of this option on their part.

The combined effect of egregious systemic price increases at a time when people are driving a lot less and their lack of disclosure means I am self insuring my car now. I won't self insure my house though :eek2:

[Grimy]

AMI actually asked if we would be having any under 25 drivers use our two primary vehicles when our son insured a car in his name. Saved us money and kept them a very happy customer.

[winner69]

Narrowly escaped a flood at our place yesterday. Most rain in one hour I had ever seen yesterday morning. I was out in the middle of it unblocking gutters in the spouting and clearing drains on our deck. I got absolutely saturated. These so called one in one hundred year events seems to be happening every few weeks. Who'd own an insurance company with every increasingly wild weather caused by climate change :eek2:

Irony is insurors now lament the consequences of climate change when for the last century insurance companies were the biggest investors in oil and mining exploration …..great returns on zillions of premium money.

[Jaa]

Irony is insurors now lament the consequences of climate change when for the last century insurance companies were the biggest investors in oil and mining exploration …..great returns on zillions of premium money.

I have told you before Winner that this is not relevant to Tower Insurance which invests only in bonds and mostly government bonds at that.

[ronaldson]

Some very smart work by the ACC trading desk if you check the latest SPH Notice filed today, updating the previous effective 15/04/2021 - In the intervening 12 months ACC acquired more than 8m shares and sold more than 7m shares with a net acquisition of a further 948,789 TWR shares at a total cost of just under 40c per share if my division is correct. Stake now exceeds 9% of shares on issue.

I have always regarded these folk as pretty savvy, so a good sign in my view.

[Sideshow Bob]

Tower Limited Half Year 2022 Results Announcement - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/392725)

Kiwi insurer, Tower Limited (NZX/ASX:TWR) has today reported half-year underlying profit excluding large events of $18.2m, up 6.4% from $17.1m at the half-year 2021.
Reported profit including large events of $17.9m was$3m, compared to $11.1m in the prior year.

Summary of key results:
• Gross written premium (GWP) $216m, up 11% on HY21
• Customer numbers increased 6% to 312,000
• Management expense ratio (MER) improved to 35.8% vs 37.1% in HY21
• Large event costs $17.9m vs $9.3m in HY21
• Underlying net profit after tax (NPAT) excluding large events $18.2m vs $17.1m in HY21
• Underlying NPAT including large events $5.4m vs $10.4m in HY21
• Combined operating ratio (COR) 94.8%, increased 3.9%
• Reported profit including large events $3m vs $11.1m in HY21Tower maintains its full year guidance of between $21m and $25m underlying NPAT and the Board announces a half-year dividend of 2.5 cents per share.

[Poet]

Tower Limited Half Year 2022 Results Announcement - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/392725)

Kiwi insurer, Tower Limited (NZX/ASX:TWR) has today reported half-year underlying profit excluding large events of $18.2m, up 6.4% from $17.1m at the half-year 2021.
Reported profit including large events of $17.9m was$3m, compared to $11.1m in the prior year.

Summary of key results:
• Gross written premium (GWP) $216m, up 11% on HY21
• Customer numbers increased 6% to 312,000
• Management expense ratio (MER) improved to 35.8% vs 37.1% in HY21
• Large event costs $17.9m vs $9.3m in HY21
• Underlying net profit after tax (NPAT) excluding large events $18.2m vs $17.1m in HY21
• Underlying NPAT including large events $5.4m vs $10.4m in HY21
• Combined operating ratio (COR) 94.8%, increased 3.9%
• Reported profit including large events $3m vs $11.1m in HY21Tower maintains its full year guidance of between $21m and $25m underlying NPAT and the Board announces a half-year dividend of 2.5 cents per share.

Obviously going to be a game of two halves this year - major claims expense almost completely exhausted in first half year - so the major claims expense for second half will be limited by reinsurance cover to be no more than $2.1m

Reaffirmed NPAT guidance at $21-25m. On midpoint of $23m, this gives PE of 11.3
Projected increased dividend to 5.5c per share - a gross yield of 8%
Seem to be faring well in inflationary environment - premium increases are keeping up with claims costs
$70m cash in bank and no debt

[ronaldson]

I think there is some way to go before the annual dividends are fully or partially imputed, so the net yield is lower.

My view is that TWR has executed well over the past three years or so, incrementally and step by step, announcement by announcement. The residual ChCh earthquake claims are proving a problem with more overcap/reopened claims received than closed, and yet another increase in provisioning, albeit minor.

The IT platform available to them is a clear positive now and will continue to be so, and investment returns will improve with the rise in interest rates.

Being a holder in a smallish insurance company is not without risk, but on the other hand a year with minimal large events can produce a sharp rise in profitability.

[ronaldson]

On Friday, 3 June 2022, TWR announced to NZX that the Reserve Bank had reduced the minimum EXCESS solvency margin it was required to hold as a condition from $25m to $15m. TWR said that as at 31 March 2022 ( before payment of the dividend now declared, but after the capital return via the implementation of the buy back ) it held $72.2m above its minimum solvency capital. I took it that figure needed to be reduced by ( now ) $15m to arrive at the actual amount held above the RBNZ condition.

One question that interested me in January this year was how significant an indicator of an insurers underlying " health " was the imposition by RBNZ of a requirement of an excess solvency margin, so I initiated an OIA request. This was at the time the TWR buy back proposal had been announced ( now completed ), which clearly could not have proceeded without regulator endorsement, and which did proceed in spite of the then $25m excess solvency margin condition.

The official response was that in January 2022 11 NZ licensed insurers were subject to an excess solvency margin condition, and that the total aggregate amount applied under those conditions was $295.5m. So TWR's condition is neither unique or exceptional in quantum. The rest of my information request was withheld as " likely unreasonably to prejudice the commercial position of the insurer " which of course begs the question why the public cannot be informed with respect to a matter which may be material to their decision which insurer should be chosen to underwrite their policy needs. In TWR's case we could speculate the excess is imposed because of the continuing uncertainty with regard to the ultimate finalisation of ChCh earthquake claims and the ongoing "over cap " claims coming from EQC to the underwriter as settlements are reopened and go over the then statutory limit for EQC but is this the case for the other 10 insurers or only some of them?

[bull....]

Tower Limited Half Year 2022 Results Announcement - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/392725)

Kiwi insurer, Tower Limited (NZX/ASX:TWR) has today reported half-year underlying profit excluding large events of $18.2m, up 6.4% from $17.1m at the half-year 2021.
Reported profit including large events of $17.9m was$3m, compared to $11.1m in the prior year.

Summary of key results:
• Gross written premium (GWP) $216m, up 11% on HY21
• Customer numbers increased 6% to 312,000
• Management expense ratio (MER) improved to 35.8% vs 37.1% in HY21
• Large event costs $17.9m vs $9.3m in HY21
• Underlying net profit after tax (NPAT) excluding large events $18.2m vs $17.1m in HY21
• Underlying NPAT including large events $5.4m vs $10.4m in HY21
• Combined operating ratio (COR) 94.8%, increased 3.9%
• Reported profit including large events $3m vs $11.1m in HY21Tower maintains its full year guidance of between $21m and $25m underlying NPAT and the Board announces a half-year dividend of 2.5 cents per share.

not to bad considering , i still think there management expense ratio is too high still.
the chart looks like its rolling back towards 63c the last pivot low after failing to get above 70c

[bull....]

Tower CEO Blair Turnbull says reinsurers are questioning their down under exposure, he sees a risk of uninsurable areas in the future

https://www.interest.co.nz/insurance/116735/tower-ceo-blair-turnbull-says-reinsurers-are-questioning-their-down-under-exposure

so there profits be impacted by not being able to insure parts of nz?

[Antipodean]

As pointed out in the article - Australian floods are quite different to NZ funds. It is entirely possible reinsurers may restrict Australian covers and not NZ covers. Or they may restrict only certain parts on either country. Or they may do nothing.

If reinsurers do change their approach to NZ then Tower can move with that... remember all F&G policies are only 12 month contracts and can be changed year to year.

Tower itself has a huge amount of data on flood risk areas in particular and are pricing appropriately... so they are potentially better placed than most NZ insurer's to weather the storm as it were. Flooding is actually one of the easier risks to manage in NZ compared to Australia.

[Scrunch]

Imo its a question of price. Reinsurers inherently want as many different risks as possible. Random events will happen and that is what causes insurance payouts. What reinsurers don't want is predictable risks being packaged as random risks. Australuan floods seem yo be getting close to this.

[bull....]

not to bad considering , i still think there management expense ratio is too high still.
the chart looks like its rolling back towards 63c the last pivot low after failing to get above 70c

might be breaking under that 63c support would mean 54 - 55c ? next support

[bull....]

is this the break down lower

[ronaldson]

Maybe a reaction to the fact no announcement to the market yet regarding the impact of the Nelson floods in particular? And more serious rain now threatening the West Coast this week.

I thought the recent reporting that Tower is exiting PNG was a positive. A volatile and high-risk country in my opinion.

[Poet]

Maybe a reaction to the fact no announcement to the market yet regarding the impact of the Nelson floods in particular? And more serious rain now threatening the West Coast this week.

I thought the recent reporting that Tower is exiting PNG was a positive. A volatile and high-risk country in my opinion.

No announcement needed. tower has a max liability of $20m for large events - after that re-insurance kicks in, they have already reported around $18.9m large events at HY so, yes, they have probably now run over their large event cap. Still forecasting $21-$25 NPAT. So given a $250M market cap, no debt, $70 mill cash, what's not to love.

Insurance companies are ticket-clippers, not risk takers, so the more disasters and consequent claims, the more profitable they will be (over the long run,of course).

Little Miss Sunshine (aka bull****) is just pulling your chain

[bull....]

No announcement needed. tower has a max liability of $20m for large events - after that re-insurance kicks in, they have already reported around $18.9m large events at HY so, yes, they have probably now run over their large event cap. Still forecasting $21-$25 NPAT. So given a $250M market cap, no debt, $70 mill cash, what's not to love.

Insurance companies are ticket-clippers, not risk takers, so the more disasters and consequent claims, the more profitable they will be (over the long run,of course).

Little Miss Sunshine (aka bull****) is just pulling your chain

no im being quite serious looking at the chart very much looks like it wants to re test lows around 55 - 56c. fundamentally they must be on track for a reported loss with all these floods.
at least we are past cyclone season :p

[winner69]

Should be doing a lot better this year from returns on investing the premiums

[Antipodean]

TWR bought back 10% of shares this FY - this will be reflected in future.
NPAT from 21m - 25m most recently affirmed. On the lower # of shares and at .615 current sp this is eps of 5.5 - 6.6cps or PE 11.11 - 9.34. Div 60% - 80% NPAT means 6-8% yeild or 4-6 cps (previous 12m 5cps).
20m reinsurance and high inflation already assumed in outlook.

https://www.youtube.com/watch?v=E9d_Ejj1_q4 from about 40min for bit from TWR CEO.
More digital flows, lower cost to service, growing GWP.
Automated SI updates and risk pricing with integrated data to ensure the ticket clipped keeps up with large events.

NTA 52cps last reported... do you think business is worth more than 9.5cps? I do. Seems market is hesistant however.

[ronaldson]

I would have thought that, at the current share price, that Tower is a potential takeover target, especially with the ChCh earthquake claims now basically receding in the rear-view mirror. The IT platform alone seems to be industry leading. A cheap way to acquire a not insignificant number of policyholders and a bundle of cash too.

[trader_jackson]

apologies, please delete - wrong thread

[Poet]

Share price up close to 6% today on modest (but not insignificant) volume - currently 66.5c
Someone chasing it up?
Are we expecting an imminent update re Nelson flooding impact on profit (I expect no change to the $21-25m NPAT projection) and FY ends in 2.5 weeks, so projection should be pretty accurate.
Insurance rates up strongly across the industry should see next year profit increased all things being equal

[ronaldson]

Closed at 67c, up over 6% on the day. I find these quick re-rates in circumstances where there is no announcement/obvious news to trigger very interesting.

If the re-rate is on the downside, it is usually possibly to discern some macro or micro economic force that plausibly lies behind the move. But re-rates on the upside can be harder to understand the logic behind the somewhat abrupt change in sentiment.

[Antipodean]

6.3% upshot basically all in the afternoon. It's only a single days trading so you can't be certain of anything, but it is the most signicifant change in the last 6 months. It also follows two prior days of climbing. Depth dropping on the sell side and buy side lifting to close gaps is most unusual without an announcement.

Should be an interesting few weeks coming up. We got an updated guidance (downgrade) end of September last year, but the full year announcement isn't typically until November. Maybe an updated guidance (upgrade) is on the way? Or could it just be a few days of unusual market volatility.

[Jaa]

Great to see an experienced tech executive and entrepreneur, Geradine McBride added to Tower's board. Much better than the endless accountants and lawyers most NZ companies seem to prefer as directors.

Tower has leaned heavily into tech and ai in what is always a tech and data heavy industry. Her counsel I imagine will be very valuable.

[mistaTea]

Great to see an experienced tech executive and entrepreneur, Geradine McBride added to Tower's board. Much better than the endless accountants and lawyers most NZ companies seem to prefer as directors.

Tower has leaned heavily into tech and ai in what is always a tech and data heavy industry. Her counsel I imagine will be very valuable.

Oh yes, very fortunate.

Just look how well Sky TV has done.

[Poet]

Oh yes, very fortunate.

Just look how well Sky TV has done.

Yes, exactly. Presumably she participated in the debacle that was the SKY / media works dalliance - I've yet to see any board accountability for that sh!t show. Yet, here she goes with a lovely new sinecure to fill the coffers. I can hardly contain my excitement

[Jaa]

Yes, exactly. Presumably she participated in the debacle that was the SKY / media works dalliance - I've yet to see any board accountability for that sh!t show. Yet, here she goes with a lovely new sinecure to fill the coffers. I can hardly contain my excitement

Sky TV may not have done well but Fisher & Paykel Healthcare certainly has, whose board she also joined in 2013. Both sources of valuable experience I would imagine.

How responsible is a single director for any particular decision anyway? An endless debate that one.

[Gerald]

Oh yes, very fortunate.

Just look how well Sky TV has done.

Shhh. If we're lucky the increasing female representation on the board should tick some ESG box somewhere and we might get some of those golden ESG dollars headed our way.

[ronaldson]

Tower has announced its reinsurance program for the year commencing 1 October 2022. Catastrophe cover has gone to $934m (was $873m) with $11.8m excess (was $11.25m), but no aggregate cover has been purchased so potential exposure to multiple large event losses? The large event budget (like self-insuring) has gone from $20m to $30m. Overall the cost of reinsurance to premiums seems to have reduced from 14.3% to 13.6% so higher profit potential but more risk exposure?

The EQC cap for natural disaster cover for residential buildings rises from $150k to $300k for policies commencing on and after 1 October so for Tower the level of risk exposure will roll off progressively throughout the year as policies renew/new policies are entered into, albeit a higher proportion of premiums received will be due to EQC.

Another year of changing profile to come. Good to get to the end of the current financial year today and the annual result will be interesting. The Nelson floods have exhausted the $20m large event budget for FY 22 but guidance had allowed for that.

[ronaldson]

And now TWR has reported acquisition of the Kiwibank portfolio (underwritten by Tower) for $5.9m and will migrate the policies to the Tower Direct platform. The announcement notes that since February 2021 TWR has purchased books from ANZ, Westpac, TSB and Kiwibank for an aggregate $26m, eliminating commission paid to those partners of around $11m per annum. Hard to fault that in a financial sense, and in principle a good use of excess capital.

Settlement expected on 1 December so the transaction falls outside the year ended 30 September 2022. Similarly, the settlement of the transaction divesting TWR's interest in its Papua New Guinea subsidiary first advised in June but not updated subsequently as to progress.

I still say this Company is executing incrementally in a positive fashion, underpinned market leading IT, and is getting tidier in structure and leaving the CHCH earthquake history in the rear-view mirror. So FY23 should be good absent too many large events, or a really major catastrophe.

[Jaa]

Acquiring the banks books has been forced on Tower to get out of a technological dead end, turn off their old systems saving cost and give those customers a better experience on Tower Direct.

My concern is where will Kiwibank send their new customers wanting insurance? Tower has no new progressive partnerships with any major bank. Just TradeMe Insurance, TSB, Ray White, NZ Financial Services Group and NZ Defence Force.

Definitely a loss of distribution compared to ANZ, Westpac, TSB and Kiwibank. Assume Tower has calculated that consumers increasingly prefer to find their own insurance online and the $11m of commission paid to the banks for referring customers was not worth it. Could work if Tower shares some of the savings with Tower Direct customers.

[Sideshow Bob]

https://www.nzx.com/announcements/400631

Kiwi insurer Tower (NZX/ASX: TWR) has updated its earnings guidance for the year to 30 September 2022.

Based on preliminary and unaudited results, Tower anticipates underlying net profit after tax (NPAT), including large events, will be around $26m, up from a range of $21m-$25m. Underlying NPAT excluding large events ($14m after tax) is expected to be around $40m, above the previously advised range of $35.4m to $39.4m.

This increase to underlying NPAT follows continued growth in gross written premiums (GWP), reflecting rate increases and organic growth from existing and new customers, stronger retention, as well as disciplined management of claims and operating costs.

Unaudited GWP has increased 13% to $457m during the 2022 financial year, compared to the prior
year. Customer numbers have grown 4% to 317,000 from 304,000.

Reported profit will be impacted by additional strengthening of the residual Canterbury earthquake provision, due to factors including inflationary impacts and the receipt of new claims. There will also be a one-off provision of around $3m after tax for customer remediation arising from an error in the calculation of multi-policy discounts. Tower is in the process of identifying affected customers and determining refunds.

Dividend guidance remains at 5.5c per share over the full year, in line with Tower’s dividend policy.

[trader_jackson]

quite positive really as some were thinking their would be a downgrade, not an upgrade! Not just the bottom line doing okay, top line growth (GWP and customer growth) fairly impressive too.

[ronaldson]

Another strengthening of the residual Canterbury Earthquake provision! I imagine Tower would have been insolvent if the ultimate provisioning had to have been applied initially. Time has enabled the Company to escape from the black hole!

As I said, it is good to put the y/e 30 September 2022 in the rear-view mirror. But basically, it seems TWR is now well positioned.

[Antipodean]

$26m NPAT results in EPS of 6.9 cps and P/E of under 9 at the share price of $.615. Not bad.
Twr are establishing a return to regular dividend payment, and this could be the start of actual return to form for the company (though only the first data point so far).
Unknown extra EQ provisioning and dent of $3m out of the final profit will subdue the impact of this (alongside general market woes) but this is a good first step for Twr.
Seems they have learned from previous years that optismitic forecasts having to be downgraded is worse than conservative forecasts being upgraded.

[Jaa]

Another strengthening of the residual Canterbury Earthquake provision! I imagine Tower would have been insolvent if the ultimate provisioning had to have been applied initially. Time has enabled the Company to escape from the black hole!

As I said, it is good to put the y/e 30 September 2022 in the rear-view mirror. But basically, it seems TWR is now well positioned.

Time and capital raised from supportive NZ shareholders.

Unbelievable there are STILL new claims 11.5 years afterwards !! Will the "one-off provisions" ever end?

[850man]

Time and capital raised from supportive NZ shareholders.

Yes, hopefully Tower realise that shareholders have kept them going and will reward shareholders accordingly. No more silly philanthropic gestures of premium rebates I hope.

[bull....]

another 11m in the kitty today

Tower completes sale of Papua New Guinea subsidiary
https://www.nzx.com/announcements/401381

looking at the financials recently i see they make about 5m from investment income , guess as the investments roll over this will increase maybe 2-3 million ? based on rates having risen. so strainght to bottom line

[ronaldson]

Yes, it looks like a good deal. Interesting that it has settled on the basis of a higher price (in NZ$) than originally reported but doesn't say why.

And all insurance companies will benefit from the increase in interest rates we are currently experiencing as they are required to hold a level of liquid capital investments. Just getting back to normal in that regard, and straight to the bottom line as bull says.

[Forrestdun]

Assume that it my have been settled in a different currency and the recent decline in the NZD helped

[850man]

FY results must be due this month, wonder what news that will bring

[Southern Lad]

FY results must be due this month, wonder what news that will bring

I’m expecting that on 23 November Tower will announce a NPAT of $26m including large events (or $40m excluding large events) and a final dividend of 3.0 cps unimputed.

As extraordinarily items there will be an increase in Canterbury earthquake provisioning due to inflationary pressures and new claims and I’m also predicting $3m after tax in one off customer remediation costs to the incorrect calculation of multi policy discounts.

GWP will be up 13% to $457m and customer numbers will be up 4% to 317,000.

See http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/400631/381273.pdf

[850man]

I’m expecting that on 23 November Tower will announce a NPAT of $26m including large events (or $40m excluding large events) and a final dividend of 3.0 cps unimputed.

As extraordinarily items there will be an increase in Canterbury earthquake provisioning due to inflationary pressures and new claims and I’m also predicting $3m after tax in one off customer remediation costs to the incorrect calculation of multi policy discounts.

GWP will be up 13% to $457m and customer numbers will be up 4% to 317,000.

See http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/400631/381273.pdf

Thanks for this info. Odd that I don't see any updates from TWR in the Direct Broking news for this year at all. Is it me or does everyone have that gap in info as well?

[Sideshow Bob]

Thanks for this info. Odd that I don't see any updates from TWR in the Direct Broking news for this year at all. Is it me or does everyone have that gap in info as well?

It is on the NZX page. https://www.nzx.com/companies/TWR/announcements

Not sure why Direct Broking wouldn't have it. Probably a question for them.

[ronaldson]

There are 33 NZX announcements issued by TWR so far this year. At least 4 relate directly to business updates, and many of the others are highly relevant to circumstances that could impact share price.

Source is Direct Broking site by clicking on TWR and then "News" in the drop down box.

[bull....]

I’m expecting that on 23 November Tower will announce a NPAT of $26m including large events (or $40m excluding large events) and a final dividend of 3.0 cps unimputed.

As extraordinarily items there will be an increase in Canterbury earthquake provisioning due to inflationary pressures and new claims and I’m also predicting $3m after tax in one off customer remediation costs to the incorrect calculation of multi policy discounts.

GWP will be up 13% to $457m and customer numbers will be up 4% to 317,000.

See http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/TWR/400631/381273.pdf

cool
so after a bad yr as far as natural disasters go the underlying business is in good shape and rising interest rates and prudent cost control combined with premium increases to cover inflation should benefit twr bottom line going forward.

Also hopefully they will at some stage us some surplus funds for another buyback at some stage

[ronaldson]

Forrestdun - The difference between A$7.9m first announced as the sale price for the PNG subsidiary and the NZ$11.0m ultimately received is clearly not bridged by reference to intervening currency movements.

[850man]

There are 33 NZX announcements issued by TWR so far this year. At least 4 relate directly to business updates, and many of the others are highly relevant to circumstances that could impact share price.

Source is Direct Broking site by clicking on TWR and then "News" in the drop down box.

Weird, the most recent news dropdown I have is 2021, no 2022 for TWR. I have 2022 for all my others. :confused:

[Poet]

cool
so after a bad yr as far as natural disasters go the underlying business is in good shape and rising interest rates and prudent cost control combined with premium increases to cover inflation should benefit twr bottom line going forward.

Also hopefully they will at some stage us some surplus funds for another buyback at some stage

Yes indeed, after a bad year for large claims they are still sitting on an 8.5% gross dividend. Zero debt, surplus funds in the bank now earning reasonable interest rates - that alone could add $12m to net profit this coming year.
With a bit of luck they will give some forward profit guidance when they report on the 23rd, and I'd like to think that could be in the range of $35 to $40 m NPAT after allowing for a budgeted level of large claims

[bull....]

Yes indeed, after a bad year for large claims they are still sitting on an 8.5% gross dividend. Zero debt, surplus funds in the bank now earning reasonable interest rates - that alone could add $12m to net profit this coming year.
With a bit of luck they will give some forward profit guidance when they report on the 23rd, and I'd like to think that could be in the range of $35 to $40 m NPAT after allowing for a budgeted level of large claims

12m on premium's received would be nice , im picking a little less ( could go up if rates keep rising ) once all there current investments roll's off. i do note they state they are pretty conservative on what they invest in ie has to be top grade only mostly

[Poet]

12m on premium's received would be nice , im picking a little less ( could go up if rates keep rising ) once all there current investments roll's off. i do note they state they are pretty conservative on what they invest in ie has to be top grade only mostly

Well, with the last HY accounts showing they have $350m in cash/cash equivalents plus investments - the increase in interest rates should result in a hefty increase in investment income. I'm picking they should be able to get 5% at their level of risk tolerance

[ronaldson]

A lot of negative sentiment affecting diverse NZX stocks later in the day but pleasingly TWR has bucked the trend, albeit on small volume.

[ronaldson]

Time to get this thread back to being high on the list ready for tomorrow morning's FY results release. Closed at 69c today so momentum is positive.

[Poet]

Time to get this thread back to being high on the list ready for tomorrow morning's FY results release. Closed at 69c today so momentum is positive.

Normalised NPAT =$26m as already signalled
IFRS probably $21m
Dividend 3cps unimputed making fy dividend 5.5cps

Outlook will be important - whether we get an outlook or not will speak volumes. I'm picking we do get one and it will be circa $40m NPAT including budgeted $30m major events costs (was $22m this year)

SP should head up from here

[winner69]

Profits so high the NZX can't cope with the size of them lol

Trading halt

https://www.nzx.com/announcements/402838

[Muse]

Profits so high the NZX can't cope with the size of them lol

Trading halt

https://www.nzx.com/announcements/402838

I was thinking the same thing lol

all those fat stacks of dolla bills no doubt

[Bjauck]

I was thinking the same thing lol

all those fat stacks of dolla bills no doubt Too many figures for carbon offsetting details and glossy photos of smiling executives?

[bull....]

Normalised NPAT =$26m as already signalled
IFRS probably $21m
Dividend 3cps unimputed making fy dividend 5.5cps

Outlook will be important - whether we get an outlook or not will speak volumes. I'm picking we do get one and it will be circa $40m NPAT including budgeted $30m major events costs (was $22m this year)

SP should head up from here

esp if they announce a buyback

[bull....]

4c share div that was a surprise :t_up:

[nztx]

I was thinking the same thing lol

all those fat stacks of dolla bills no doubt


but NZX have already spent their share of them on an acquisition today :)

[nztx]

4c share div that was a surprise :t_up:

No Imputation credit = Congrats Holders - the taxman swipes 33% of the loot before you see it :)

[ronaldson]

Well, it's swiped as RWT. So, if you are on a lower tax rate the difference will be refunded when you file your Tax Return at year end.

[bull....]

exactly 6.5cps is over 9% yield less your tax rate still pretty good be over 13% one day at current prices if they start imputation credits

[ronaldson]

I thought this y/e 30 September result was a decent one with a number of signals that TWR is incrementally building a worthwhile business. That said, it is a good year to now have behind them, with the $5.5m net additional provisioning for the remaining Canterbury earthquake claims (when will the so-called over caps cease arriving?) and $2.6m for customer remediation for errors in applying the multi-policy discounts.

Forward dividend guidance is to maintain the current 6.5cps dividend (but will still be unimputed). The disposal of the PNG interest has enabled the digital rollout to the rest of their Pacifica involvement and a major hub is to be established in Fiji.

Gross Written Premiums are going gangbusters, as are MyTower registrations and the partner relationships, so seizing market share in the broader general insurance sector. Today's (and earlier) OCR increase means investment income will rise sharply in FY23 from FY22. Imagine if the $30m set aside for large events isn't required or is only partially required (the 5-year average is $16m) - what could NPAT look like then?

And they have the best IT platform to underpin growth going forward. It won't all be "blue sky" no doubt, but the foundation is certainly in place after a decade trying to get out from under the Canterbury earthquake boulder.

[bull....]

share price seems to have re-acted well to the results , steady increase. still hoping for a buyback with there surplus funds at some stage

[ronaldson]

Mmmm - did anyone else notice the unusually distant ex-date and payment date for the 4c final dividend?

Doesn't go ex until 17 January, nearly two months after the announcement, and is not paid until 1 February, so that is helping keep the share price up meantime. And since that dividend requires a full $15m from a NPAT of only $18.9m I expect the interest earned meantime over that period will be welcome to TWR. The dividend was a cent per share more than most anticipated, so the Board have bent over backwards to show holders they mean to reward them over time.

Note that the dividend is unimputed and therefore subject to 33% RWT, being a 1.32cps deduction when received "in the hand".

Given that in combination with the interim dividend the total payout for FY22 exceeded NPAT I suggest a buy-back is not imminent. But, as pointed out in 1671 above, we can hope that FY23 is to be a watershed outcome.

[Southern Lad]

Mmmm - did anyone else notice the unusually distant ex-date and payment date for the 4c final dividend?

The ex date and the dividend payment date are the same as the final FY21 dividend.

TWR has a significant level of tax losses (c. $85m gross losses at September 2022) so dividends will remain unimputed for many years to come. As the value of the tax losses is recognised as a deferred tax asset, use of the tax losses results in tax expense in the P&L but are not a cash cost, hence the company has cashflow to pay a higher dividend. If tax was being paid to IRD, the total gross dividend may be similar but there would be a mix of cash and imputation credits. So my read, don’t get to hung up about the absence of imputation credits.

[bull....]

big volume in twr today

[850man]

big volume in twr today

1,996,242 in one single SP transaction at 70c, otherwise normal level of bugger all. Not sure what that signifies.

[ronaldson]

Annual Report for y/e 30 September 2022 now available. Well-presented and worth a close read in my opinion.

The share price is consolidating around 72c now. I feel there are signs it will remain at or above 70c even when it goes ex dividend in mid-January as indicators are tracking positively.

[bull....]

Annual Report for y/e 30 September 2022 now available. Well-presented and worth a close read in my opinion.

The share price is consolidating around 72c now. I feel there are signs it will remain at or above 70c even when it goes ex dividend in mid-January as indicators are tracking positively.

benefits from higher rates and business is relatively sticky so should be a good yr for tower next yr bar no major weather events etc

[ronaldson]

And now we have the TWR CEO selling 116,420 shares on market at just over 70cps average, and despite being cum dividend. Apparently, permission was granted to do that so may be a personal reason behind the disposal?

[winner69]

And now we have the TWR CEO selling 116,420 shares on market at just over 70cps average, and despite being cum dividend. Apparently, permission was granted to do that so may be a personal reason behind the disposal?

Interesting he seems to have an Sharesies account

Awful lot of trades listed eh

Some say not a good sign when CEO sells

[Rawz]

Those the ones he bought last year for high 70 cent range? Not a good trader (like the rest of us)

[nztx]

Interesting he seems to have an Sharesies account

Awful lot of trades listed eh

Some say not a good sign when CEO sells


Bills for the CEO's bash out at the holiday bach might be due anytime ;)

Or did the whole office get flown out to a remote holiday destination somewhere in the Pacific for
the occasion ? ;)

[ronaldson]

Interesting comment Rawz (#1681) - I looked back as far as 2021 - he bought 95644 in March '21 at 73.7cps, 90000 in May '21 at 76cps and 65000 in November '21 at 68cps. Of course, he "sold" 41444, being 10% of his then holding, into the compulsory buy back in 2022 at 72cps, and now 116,420 at marginally over 70cps cum dividend in late Dec '22. I guess as a top rate taxpayer a 4.0c unimputed dividend is only 2.44c net - he may have expected a price drop equivalent to the 4.0c when ex div in January, so beneficial to sell beforehand to avoid the tax circumstance.


Still, as an enthusiastic buyer in 2021 it would be good to think he had had a compelling private reason to sell or the optics aren't great.

[nztx]

Any exposure to recent & current extreme weather events onboard at TWR ? :)

Presumably further inflationary adjustments are being inflicted on all those 'covered'
but already reeling under other inflationary worries & costs spiralling upwards too

[nztx]

https://www.nzherald.co.nz/nz/weather-heavy-rain-watch-in-wellington-cancels-cook-strait-ferry-services-gisborne-wastewater-system-floods/BQKOMWLQLBAV3A3W2JYBBSVY7I/


Weather: Cyclone Hale, first tropical cyclone of 2023, expected to hit North Island early this week

Surely not ?

When shall a trading update be expected to be Haled forth from the good folk sitting atop the lighthouse
while the fierce storms rage ?

[Antipodean]

Whats the question here? Were you surprised weather/climate still exists in 2023?

Generic storm response: Based on TWR's coverage % in NZ and the path of this cyclone - it is almost inevitable some Tower covered properties will likely be in the path.

Will it result in a trading update? Only if it is material.
Will it be material? Many factors (where applicable) go into this. # properties affected, how significantly they are affected, remediation abilities, excesses, reinsurance treaty recoveries & preventitive measures (local, civil & company).

Insurance companies expect and plan for storms, this isn't unusual.
Why is every media notification of a new storm a doom bell for TWR?

[Balance]

Whats the question here? Were you surprised weather/climate still exists in 2023?

Generic storm response: Based on TWR's coverage % in NZ and the path of this cyclone - it is almost inevitable some Tower covered properties will likely be in the path.

Will it result in a trading update? Only if it is material.
Will it be material? Many factors (where applicable) go into this. # properties affected, how significantly they are affected, remediation abilities, excesses, reinsurance treaty recoveries & preventitive measures (local, civil & company).

Insurance companies expect and plan for storms, this isn't unusual.
Why is every media notification of a new storm a doom bell for TWR?

https://www.stuff.co.nz/national/weather-news/300780108/live-cyclone-hale-deluge-set-to-top-400mm

Because TWR has tended to treat these events as abnormal and one offs?

I had TWR shares and bailed out after one abnormal storm too many!

[nztx]

https://www.nzherald.co.nz/nz/weather-gisborne-families-self-evacuating-more-torrential-rain-forecast-as-cyclone-hale-hits/NOMWNDYU7FHKNIJSZNQDQDSBPA/

In Gisborne, conditions were being described as worse than Cyclone Bola.



Further north, Auckland’s northern region and Northland have been hit by nearly a month’s worth of rain in the past 24 hours as the ex-cyclone strikes, MetService says.

sounds pretty abnormal ..

[850man]

Abnormal 6 years ago but more the norm these days. TWR have adjusted premiums to take into account increased risk as well as increases in building costs

[Poet]

https://www.stuff.co.nz/national/weather-news/300780108/live-cyclone-hale-deluge-set-to-top-400mm

Because TWR has tended to treat these events as abnormal and one offs?

I had TWR shares and bailed out after one abnormal storm too many!

I don't think they consider these events abnormal, in fact they have explicitly budgeted for four of them this year, each with a $10m excess before re-insurance kicks in.

Admittedly, the ChCh earthquakes were an abnormal event due to scale and cost. These weather events aren't, they are just business as usual.

I wouldn't even think this latest storm will make it to the level of one of this year's budgeted large events as it doesn't sound as if any residential property has been damaged.

[peat]

We did have a very busy year in the insurance sector last year, very busy.... so no doubt this will affect insurers profits in general to some extent
But I agree its BAU cf CHC 2011

disclaimer no assoc with TWR at all.

[nztx]

Still no Imputation credits on the up & coming 1 Feb 23 dividend

Wonder how much longer to go until TWR get to massage the taxman's hand with some coin ? :)

[bull....]

Insurers begin counting cost of Cyclone Hale
https://www.stuff.co.nz/business/130961342/insurers-begin-counting-cost-of-cyclone-hale

update from tower ?

[Antipodean]

Insurers begin counting cost of Cyclone Hale
https://www.stuff.co.nz/business/130961342/insurers-begin-counting-cost-of-cyclone-hale

update from tower ?

Some back of the envelope calcs... figures showed market share for IAG at 50% compared to TWR at 7% (though these are older probably still close enough for this stage)...
If IAG had 181 calls as per your linked article... TWR could have had less than 24 calls in relation to this.
Many could be call outs for drying carpet and patching leaking roofs. Some may be larger but will take time for loss adjusters to confirm.

As with any large event, we will need to wait a couple of weeks once the data is more settled and provisional adjusted costs are closer to reality then we will probably get an update. However as per above doesn't mean we will get a material change update.

Storms happen every year.

[Poet]

Interesting price action today. Share went ex 4c dividend today but rose 3c on reasonable turnover. Puzzled as to why someone would wait until today to buy. Maybe they were expecting a fall larger than the 4c dividend and were disappointed.

[ronaldson]

Poet - It was definitely out of whack as you say, but the market has corrected the mispricing subsequently.

[bull....]

only matter of time before its back to 75c .... performance of aussie insurance stocks has been good of late so demand is there to buy

[Dlownz]

Well this might be a big hit for Tower.
Auckland has really been hit hard

[nztx]

Well this might be a big hit for Tower.
Auckland has really been hit hard

BOP, Coromandel & Gisborne also on multiple ocassions, add in Northland too

Can't be many free passes left in the current towering disaster season ..

How long until Dividend crapoly is prescribed and the SP buckles back down towards the 55c mark ?

[ronaldson]

The ASM Notice has now issued for Tuesday 28 February so my guess is we will get an update at or immediately prior to that occasion. A few cars will need to be written off, and a small number of homes have been subjected to flooding today as TV news tends to exaggerate the overall circumstance. I really hope those affected are comprehensively insured, despite including TWR in my portfolio. Events like today are actually good for future business, and demonstrate that even in harder economic times folk should not risk their major assets by foregoing cover.

Yes, there will be claims but I doubt they will aggregate to be material. However the weather does seem to be more extreme and impactful than in the past. But insurers have the ability to reprice every 12 months to maintain margin if things start going south. And risk-based pricing will kick in going forward where properties are flood prone, to mitigate subsequent exposures.

[nztx]

Looks a bit more serious than that - AKL State of Emergency for 7 Days

Flooding looks quite extensive - Commercial & Private properties

https://www.nzherald.co.nz/nz/auckland-flooding-ranui-streets-homes-swamped-motorways-blocked-fenz-nzdf-called-in/3YQ54VEQTJE2HJDRYHLYAYHOTQ/

[Lego_Man]

Looks a bit more serious than that - AKL State of Emergency for 7 Days

Flooding looks quite extensive - Commercial & Private properties

https://www.nzherald.co.nz/nz/auckland-flooding-ranui-streets-homes-swamped-motorways-blocked-fenz-nzdf-called-in/3YQ54VEQTJE2HJDRYHLYAYHOTQ/

Massive problems incoming for TWR.

[clip]

Yeah there is going to be significant damage in Auckland. Commercial bay flooded, Auckland Airport flooded, Westfield 277 flooded, paknsave wairau park flooded, let alone all the ruined cars and houses

[Lego_Man]

I'd say full "large events" contingency wiped for 2023. Probably no divvy.

[sideline]

The ASM Notice has now issued for Tuesday 28 February so my guess is we will get an update at or immediately prior to that occasion. A few cars will need to be written off, and a small number of homes have been subjected to flooding today as TV news tends to exaggerate the overall circumstance. I really hope those affected are comprehensively insured, despite including TWR in my portfolio. Events like today are actually good for future business, and demonstrate that even in harder economic times folk should not risk their major assets by foregoing cover.

Yes, there will be claims but I doubt they will aggregate to be material. However the weather does seem to be more extreme and impactful than in the past. But insurers have the ability to reprice every 12 months to maintain margin if things start going south. And risk-based pricing will kick in going forward where properties are flood prone, to mitigate subsequent exposures.


If it does get big, the excess for catastrophe cover reinsurance is 11.9m

[bull....]

Massive problems incoming for TWR.

if rain keeps falling in auckland and flooding gets worse it might be

[Poet]

Massive problems incoming for TWR.

Tower has re-insurance for these events with a maximum contribution from Tower of $10 million per event. According to their comany releases Tower has budgeted for four of these 'major' events this year. As far as I know (after four months of Tower's insurance year) this is the first to exceed the $10m limit, so presumably TWR is actually ahead of where they had budgeted to be.

TWR takes gross premiums of $400m per annum and expects to spend half of that paying claims

If we didn't have damaging events, there wouldn't be a need for insurance and tower wouldn't even exist as a company.

[Nor]

I had a few shares in Tower but decided insurance companies in NZ are a mugs game.

[nztx]

State of Emergency declared in Waitomo earlier tonight now too

[ronaldson]

Yes, my post above (#1700) was almost certainly misguided as to the likely claims impact from the heavy rainfall event. I expect it will reach the catastrophe reinsurance figure of $11.9m on this occasion so a significant (but limited) bite out of the overall large events provision made by Tower for y/e 30 September 2023. Given the closure of AIA International for a period even Travel Insurance claims will magnify, so consequences can be broader than one would have anticipated.

But I am sure Lego Man is wrong with his speculation that there will be no dividend, whether in reference to that immediately payable (4cps due on 1 February) or the interim/final for y/e 30 September 2023 yet to be declared. TWR is an insurance company after all, and as Poet points out its more or less a " business as usual " circumstance even thou very unfortunate for those actually caught up in it.

[nztx]

https://www.nzherald.co.nz/business/auckland-floods-devastated-school-uniform-shop-owner-loses-450k-of-stock/AZXIFVJGXBC2LOUWRYEIQ2LPME/

Auckland floods: ‘Devastated’ school uniform shop owner loses $450K of stock



A spokeswoman for insurance group Suncorp New Zealand, which included brands AA Insurance and Vero, said in a statement it had received more than 1000 claims by Saturday afternoon and was “expecting significantly more”.

Tower’s chief claims officer Steve Wilson said it was experiencing “very high claims volumes” and was expecting the Auckland floods to be a large insurance event.

“Our job as an insurer is to be there when people need us most. Our teams care deeply about our customers - we’re working as hard and as fast as we can to do what’s right by them.”

Tower assessors were visiting affected areas on Saturday morning and the company was flying in more assessors from around the country. It had also added extra resource to its call centre and online claims department, including dedicating its call centre in Fiji, Wilson said in a statement.

[nztx]

The guys at TWR had better keep the Lighthouse manned

Here's the next instalment on it's way:

https://www.nzherald.co.nz/nz/metservice-issues-thunderstorm-watch-for-northland/FRDQ5WUPKFAEZLEUKTLSNP4IJA/

MetService issues thunderstorm watch for Northland


Plus - 10.30 am Live Update


New Zealand’s three biggest weather agencies are predicting another heavy deluge for Auckland and North Island centres over coming days;

[winner69]

The guys at TWR had better keep the Lighthouse manned

Here's the next instalment on it's way:

https://www.nzherald.co.nz/nz/metservice-issues-thunderstorm-watch-for-northland/FRDQ5WUPKFAEZLEUKTLSNP4IJA/

MetService issues thunderstorm watch for Northland


Plus - 10.30 am Live Update

Would this be a new ‘major event’ or would a sequence of storms be rolled into ‘major event’

[clip]

On the news just now AA said this could be the worst wet weather event in terms of insurance claims in history. 6pm Three News

[winner69]

On the news just now AA said this could be the worst wet weather event in terms of insurance claims in history. 6pm Three News

Just as well for reinsurance eh …even though that is going to get more expensive

All insured will eventually pay

[Perky]

Agree, that’s how I see it. The insurance companies take a short term hit, re adjust next years premiums and go again.
Still it not a bad business model. Get a whole lot of cash up front for an event that may or may not happen and only pay out if such event actually occurs. Invest that money and keep the difference.
Unfortunately a small island nation located on the ring of fire seems to have frequently occurring events so might not be the best place in the world to run a profitable insurance business

Bit of trivia..

Monaco and Andora are the countries least affected by natural disasters according to a 2022 study. That year, these countries had a disaster risk index (WRI) of 0.26, due to low exposure and susceptibility to disasters. Among the countries with the highest disaster risk (https://www.statista.com/statistics/1270469/disaster-risk-index-most-affected-countries/), the majority were islands that were prone to be affected by sea-level rise.

[850man]

Rain effects play - SP down 7% on opening today

[Perky]

Would this be a new ‘major event’ or would a sequence of storms be rolled into ‘major event’

You always ask insightful questions Winner.

One of the most interesting cases of this question was the terrorist plane attacks on the twin towers. Was it one event or could they be aggregated?

quite interesting reading on another wet day in Auckland
https://hsfnotes.com/insurance/2016/10/31/wtc-and-aggregation-the-meaning-of-arising-from-one-event/

[ronaldson]

The ChCh earthquake sequence was also interesting in that regard. And given initial damage was often exacerbated by subsequent shaking, to which "event " were costs to be allocated. And when did new "drop down " reinsurance arrangements kick in. Very important since most major earthquakes have quite large fore/aftershocks with sometimes decent intervals between.

On another note, as a TWR holder I am realistic about the current share price action this morning. The rainstorm has been a very significant event and will have long-lasting ramifications. But it would be possible to overestimate the actual impact upon shareholders given reinsurance, and also EQC's contribution to landslip losses. But I guess that the additional costs of responding to an almost unprecedented number of claims fall on the insurer rather than the reinsurer, so that will go directly to the bottom line. And it would be naive to consider every claim will settle without contention as the ChCh event shows/is still showing.

And what a wake-up call to Auckland in particular regarding stormwater infrastructure. Rate rises are also coming.

[bull....]

i see iag said there network ( ami , state , nzi ) has received 5000 claims as of this morning. announcement by them in australia

anyway i topped up this morning

[Nor]

Reinsurance isn't guaranteed is it. Depends on a big overseas insurer willing to take the risk.

[777]

From their dividend announcement in November.

Tower continues to take decisive action to address the increasing severity
and frequency of extreme weather events. This includes future proofing its
underwriting capability by expanding risk-based pricing to inland flooding in
FY22 and coastal hazards in FY23. For the 2023 financial year Tower has
increased its perils allowance by 50% to $30 million. The successful renewal
of Tower's reinsurance programme with $934m of catastrophe cover will also
provide important protection from this volatility.

[nztx]

https://www.nzherald.co.nz/business/tower-shares-slide-as-flood-claims-continue/6DKPEWHKPBCY5LAFYWT22Y55YU/

Tower shares slide as flood claims continue



Shares in listed insurer Tower slumped 8.5 per cent on the NZX this morning following extensive flooding in and around Auckland.

Shortly after 10.30am Tower was trading at 65c, down 6c or 8.45 per cent on Friday’s closing price.


Currently (20 min delay) 67c

[Antipodean]

Reinsurance treaties are similar to insurance contracts in that once they are signed they are binding. Also in that they are renegotiated at certain intervals, and lucrative enough that providers are always out there.

Market overreacting in relation to twr imo, therefore I also topped up this morning at what will be long term advantageous prices.

Horrific for people on the ground, and this is what insurance is there for.

[Sideshow Bob]

https://www.nzx.com/announcements/405981

Tower Update on Auckland & North Island Weather Event

Tower Limited (NZX/ASX: TWR) said today that it is assessing the impact of the significant weather event that has been affecting Auckland and parts of the upper North Island since Friday.

Tower CEO, Blair Turnbull says Tower is firmly focused on supporting affected customers and communities and is utilising extra resourcing from its teams in Auckland, Rotorua and Suva to assist customers.

“Tower is well prepared to respond to such large-scale events and is in a strong position to support the recovery. We are proactively communicating with our customers via text message and email, we have bolstered resourcing in our contact centres and have assessors on the ground.

“We have received approximately 1,900 claims for this event. Of these around 1,000 are house claims and the remainder are motor and contents claims. We expect to receive further claims as customers assess their damage,” says Turnbull.

Tower has robust reinsurance arrangements with multiple treaties in place. These arrangements cover house, contents and motor losses, in addition to providing $934m of catastrophe cover. The catastrophe cover has an excess of $11.85m which is within the $30m Tower has allowed for large events in FY23.

Tower’s FY23 full year guidance remains unchanged.

[Antipodean]

Tower’s FY23 full year guidance remains unchanged.

To restate - that is underlying NPAT of $27m-$32m... eps of 7.1 to 8.4, and 6.5cps div which translates gross yield of 9.49% at close price today of 68.5c.

[ronaldson]

Correct Antipodean. Still, this is not a share to hold if you can't sleep easy at night doing so.

And best to avoid if you are driven to cut and run when a large event is signaled, even thou it is true that costs/expenses not covered by reinsurance do ultimately go to the bottom line. The true cost to TWR of this event will no doubt be considerably more than the $11.85m excess quoted above, but nevertheless is provisioned for. But one would hope that no other happening on this scale eventuates between now and y/e on 30 September.

And while it is correct reinsurance will always be available to the industry the question ultimately becomes "at what cost". NZ and Australia are rapidly becoming high risk in the eyes of these underwriters in comparison with earlier decades, so likely no more "soft" renewals (indeed TWR's current arrangements may have reflected this).

Further, the ChCh earthquake established that contentions in relation to settlement of claims can be ongoing for very extended periods. I believe special legislation was needed (and is still being utilised) for that purpose. One positive step Government could take, if it is required, is to extend that legislation to encompass this event so the specialist Tribunal is available.

[bull....]

To restate - that is underlying NPAT of $27m-$32m... eps of 7.1 to 8.4, and 6.5cps div which translates gross yield of 9.49% at close price today of 68.5c.

exactly nice financials.
on a side note simon bridges was saying the other day a lot of businesses cancelled there insurance to save money during covid and a lot of renters dont have insurance.
of the 1000 house claims im guessing they are cabinet joinery , carpets related stuff rather than structural

and of course all insurers will probably raise premiums more now esp higher risk properties for flood events ( just like they do in aus )

[ronaldson]

TWR shares are currently trading at 67c on-market so have held up quite well considering the publicity around the rainstorm event signaled as the largest cumulative non-earthquake insured loss ever in NZ.

I was trying to better understand TWR's exposure circumstance for residential cover, contents and motor in particular. It seems for the year commencing 1 October 2022 TWR has catastrophe cover of $934m but unlike earlier years this is a lump sum regardless of the number of such events (in lieu of further covers that "drop down" for subsequent events as in past years) although no doubt additional reinsurance cover could be purchased to apply to new events should the current remaining cover be thought inadequate after estimating potential losses for this event. That additional premium would be a direct hit to the bottom line but may now be prudent for TWR to implement.

Then there is EQC which cover natural hazard/landslip events applicable to residential housing (and land within 8m of the structure?) capped for policies commencing before 1 October 2022 at $150k + GST and for new policies, or those renewing after 1 October 2022, at an increased cap of $300k + GST. So by my estimate about 30% of such policies will have renewed/been entered into after 1 October and have the higher cap applied to any claim from this event and the remaining 70% will only have the first $150k +GST reimbursed by EQC - the remainder of claims above those amounts of course being attributed to TWR. Also EQC no longer covers any part of a Contents claim, nor I presume did it cover MV claims in whole or part. So individual residential claims will be mitigated by EQC cover but not all to the extent which would have applied had the event occurred somewhat later in the financial year. It seems inevitable that the overall impact upon the level of catastrophe cover will be substantial.

As will the costs of claims handling, litigation/settlement costs for contentious claims (which the ChCh experience suggests will be many!) and the likely cost of additional catastrophe cover to support ongoing solvency if further major events fall within the current year. And labour and supply chain issues have repair/reinstatement expenses at an all-time high just now.

It won't be pretty.

[Antipodean]

EQC are not involved in Motor vehicle coverage. There is a fixed levy for Fire Services built into the premium.

Residential land in the case of flood perils will have EQC coverage - but private insurance covers the dwelling and contents for this peril.

Flood damage to contents and buildings can vary wildly, though typically not as bad as fire/earthquake as a peril (which often can be 100% loss which require rebuild and demolition/clearing of what remains on site). Floods often involve carpets / walls / joinery to be cut & replaced - if they cannot be dried out with fans/dehumidifiers. Loss adjusters assess and co ordinate what needs to be done.

Remember also that Tower has been proactively using RMS flood plain data to decrease exposure to flood prone properties. This may have been directly premium related - but note is can also be handled with higher excesses and/or conditions on the cover (potentially for specific perils). Going forward they can further use this for next renewal, policy by policy if the information is sophisticated enough.

Administration side costs are under Tower, but looking at the growth in GWP compared to claims expenses that has been on the right side of the ratio for the last few years. The last few quite busy years. Don't see much issue here myself (but won't obviously know until later in the year).

[Poet]

Hi Ronaldson, nice post, much appreciated- but are you able to give a reference for this...

I was trying to better understand TWR's exposure circumstance for residential cover, contents and motor in particular. It seems for the year commencing 1 October 2022 TWR has catastrophe cover of $934m but unlike earlier years this is a lump sum regardless of the number of such events (in lieu of further covers that "drop down" for subsequent events as in past years)

[ronaldson]

Poet - The source is TWR's NZX announcement on 30 September 2022 titled "Successful Placement of FY23 Reinsurance Programme" supported by the further announcement on 30 January 2023 by way of an update to the current event.

Antipodean is trying to tell me (correctly) that EQC does not cover storm or flood damage to residential buildings, only land under the building or within 8 metres (and with certain exceptions for main accessways, services, retaining walls and so on within 60 metres ) but does cover landslip. So TWR's liability may not be offset by EQC to the extent I suggested.

The last major flood event in Auckland was largely focused on the Kumeu area, only a couple of years ago. This time I have not seen any reports of significant flooding at that location - go figure!

[Poet]

Poet - The source is TWR's NZX announcement on 30 September 2022 titled "Successful Placement of FY23 Reinsurance Programme" supported by the further announcement on 30 January 2023 by way of an update to the current event.

Antipodean is trying to tell me (correctly) that EQC does not cover storm or flood damage to residential buildings, only land under the building or within 8 metres (and with certain exceptions for main accessways, services, retaining walls and so on within 60 metres ) but does cover landslip. So TWR's liability may not be offset by EQC to the extent I suggested.

The last major flood event in Auckland was largely focused on the Kumeu area, only a couple of years ago. This time I have not seen any reports of significant flooding at that location - go figure!


Thanks, your earlier post said that the catastrophe cover doesn't reinstate after each of multiple events - I think you are misunderstanding the situation.

TWR June 2022 release said:

''Due to market conditions and large losses internationally, reinsurers have moved away from aggregate structures at reasonable pricing, therefore Tower has elected not to purchase aggregate cover for FY23. The aggregate programme previously covered the insurer for multiple large events losses over the year.''

I think it works like this:

The aggregate structure refers to there being a cap on total losses relating to multiple large events in one year - last year this was $20m but this year there is no cap so if there are subsequent large events this year TWR might have to stump up with another 11.85m excess for each event. They say they have budgeted $30m for this in FY23

However after each large event, the total available cover for large events should re-instate to the $934m

[winner69]

IAG latest …..all too complicated to apprehend this time of day but Auckland impact has some big numbers

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/IAG/406212/387971.pdf

[kiora]

Will Cove shake up NZ Car Insurance Market?
https://www.coveinsurance.co.nz/

[peat]

IAG latest …..all too complicated to apprehend this time of day but Auckland impact has some big numbers

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/IAG/406212/387971.pdf

I really dont know how they're creating those numbers re the AKL event.

There are many thousands of claims unassessed and sure most of them will dry out and only need some building work cf a complete rebuild but they dont have a clue on the numbers yet imo

Interesting to see their cutoff point (where re-insurance kicks in).

[nztx]

20,000 claims lodged according to the squawk box .. wonder how many of those
claims are for Tower's policies ?

One things for sure - this means everyone's Insurance premiums & Govt's EQC rake off
on top will likely be catapulted north by the Insurance Companies very soon just like
what was seen after the Canterbury earthquakes :)

[ronaldson]

Thanks to Antipodean and Poet for helping me understand the TWR reinsurance circumstance for FY 23 which commenced on 1 October 2022. I have sought further clarification from a TWR source and can now offer the following for everybody's information.

I apologise for my lack of technical skills in facilitating this post but the starting point is TWR's announcement to the NZX on 23 November 2022 titled "Tower announces positive FY22 result". Then go to one of the attachments to that announcement, " Investor Presentation ", and page 19 of that document which has a reinsurance overview " Robust Reinsurance Programme Provides Protection" and a diagram worthy of close review.

Tower has full (ie prepaid) reinsurance cover for two separate catastrophe events of up to $889m in total losses each (subject to retentions of $11.875m, which would be at TWR's expense). There is also an additional coverage, known as 'drop down' coverage, of $45m. This dropdown coverage can be used to either increase the cover on the first event, up to $934m, or to provide cover on a third catastrophic event (subject to a slightly higher retention of $12.5m).

Part of the cover disclosed in the diagram is identified as "multiyear secured" in relation to the 1st and 2nd catastrophe events. This layer is only highlighted in the diagram because part of the catastrophe cover is via long term (typically 3 years) reinsurance treaties which are not subject to renegotiation every year as is the case with the balance of the catastrophe reinsurance coverage (which reduces risks associated with the annual renegotiation).

Then there is something not identified in the diagram called "proportional reinsurance coverage" which applies to high value properties for both single events and for catastrophes. Under proportional reinsurance the reinsurer receives a % of the premium TWR receives from the customer. The reinsurer then pays a % of the claims in relation to such property, whether it is part of a large event or not. TWR recovers under any proportional reinsurance treaty first, and then the remaining cost to TWR may be recovered on the catastrophe cover once the excess for the catastrophe event has been used up. I didn't ask what value of property triggers this reinsurance but it mitigates the risk of one property using up a significant part of the large events provision.

I did ask what, so far as TWR is concerned, constitutes a "large event" so that claims costs will fall/be allocated within the $30m provision for such circumstances rather than be simply expenses as business as usual as for lesser claim events. The response is that the definition currently used is "an event which impacts two or more property addresses and has a net cost to TWR of more than $2m.

So reinsurance involves multiple treaties with reinsurers but the above sets out the combined arrangements in place for FY23. The insurance entity regulator (RBNZ) must take an interest in these arrangements, but I don't know what criteria are applied to mitigate the risk of an entity failing.

Hope this helps those following this thread.

[ronaldson]

And I forgot to mention that in FY22 TWR had a lesser large event provision than currently, $20m. In FY22 large events comprised the Tonga volcanic eruption, ($6.8m), Cyclone Dovi ($3.6m), North Is rainstorms ($6.4m) and Nelson floods ($4.3m), which in aggregate marginally exceeded the provision then made. No doubt that was one reason underpinning the increase in that provision to $30m for FY23.

[Poet]

Thanks Ronaldson for that deep dive into the re-insurance arrangements. Very helpful indeed.

Also note that last year TWR had aggregate catastrophe cover which meant that their total liability for large events for the year was capped at $20m because beyond that level the reinsurance would be paying. This year they have declined to buy this aggregate cover (because it was too expensive) so they have increased the total budgeted allowance for large events to $30m.

I think that they have now used up $11.8m of this allowance. so still 18.2m in the budget for the remainder of the year.

[nztx]

https://www.nzherald.co.nz/nz/tasman-west-coast-weather-motorists-warned-to-not-travel-unless-absolutely-essential/P6W4IKDDWFCTFHZPDX3CUE35SE/

Tasman, West Coast weather: Residents warned that no cell service will be available as slips rip through the region

Just when ..

but fortunately many West Coasters know all too well how to swim
and deal with large quantities of localised H2O - unlike certain Beehive
inhabitants where it just sits lingering rotting away their brains :)

How does TWR's Cover Gauge look ? Heading towards full yet ?

[Antipodean]

Stunning news, rain on the West Coast?
Are you seriously suggesting ~$900m of coverage has been used up?

[Nor]

For reinsurers to remain interested there would need to be many years between $900 million disasters, the exact number depending on the premium. Doesn't seem likely in disaster prone New Zealand.

[nztx]

https://www.nzherald.co.nz/nz/auckland-weather-metservice-warns-of-potnential-cyclone-in-pacific/VDXJWQD3YRDIPGU6NLM72XX76E/

Darn ..

Auckland weather: MetService warns of potential cyclone in Pacific

6 Feb, 2023 05:57 PM


MetService is warning a cyclone is likely to brew in the Pacific in the coming days, with parts of the country that are still recovering from recent extreme weather in for another thrashing, should it pass close by.


Any insurance cover available for possible risk to holders of TWR shares ? ;)

[bull....]

looks like a lot of the selling is being accumulated at good prices

[nztx]

looks like a lot of the selling is being accumulated at good prices


the dividend buyers might still be slightly out the back door even with the sudden bounce :)

[bull....]

the dividend buyers might still be slightly out the back door even with the sudden bounce :)

till it gets back in the 70s probably. suncorp results today were pretty good

[bull....]

business as usual at tower ... full yr guidance maintained even after auckland floodings

https://www.nzx.com/announcements/406413

bargain buying at 65 ?

[Balance]

A New Zealand forecaster has branded the impending cyclone set to hit the top of the North Island as one of the “most serious storms of the century”.

There remains uncertainty over the exact path of the newly-formed Cyclone Gabrielle will take as it moves near to New Zealand, but WeatherWatch’s Philip Duncan says a “direct hit” is “looking more likely and extremely concerning”.

https://www.nzherald.co.nz/nz/cyclone-gabrielle-could-be-one-of-the-most-serious-storms-to-hit-new-zealand-this-century-forecaster/OQ2EBHIY7VFO5CSKCIFYIM7XRY/

[Jaa]

business as usual at tower ... full yr guidance maintained even after auckland floodings

https://www.nzx.com/announcements/406413

bargain buying at 65 ?

Not exactly, they are going to top up their catastrophe insurance. How much will that cost?

Is it just me, or does $934m of yearly catastrophe cover seem a bit inadequate anyway? I know EQC cover is increasing to $300k but that's still not a lot of houses.

Also remember Tower has not had an annual result in 12 years unaffected by "one-off" unexpected, unbudgeted cost increases from the Christchurch earthquakes. Despite every year adding excess contingencies over and above the actuarial estimates. There are STILL open claims relating to it.

EQC's Natural Disaster Fund btw is only $250m with $7.2b of reinsurance. Only enough to cover 25k claims for the full $300k.