TWR - Tower Insurance.

[Poet]

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

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

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

[tim23]

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

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

[Southern Lad]

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

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

[percy]

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

[Nor]

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

[bull....]

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

[bull....]

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

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

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

[X-men]

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

[Antipodean]

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

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

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

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

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

Really looking forward to the HY next month.

[tim23]

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

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

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

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

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

Really looking forward to the HY next month.

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