TWR - Tower Insurance.

[Sideshow Bob]

Tower Limited Half Year 2022 Results Announcement - NZX, New Zealand’s Exchange

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

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

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...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