TWR - Tower Insurance.

[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/...LAFYWT22Y55YU/

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).