TWR - Tower Insurance.

[RRR]

Chch earthquake total costs now $22-31 million.

[Marilyn Munroe]

Tower have claimed that they are not liable for the full cost of replacement for clients in the Christchurch Red Zone where but for the Red Zone abandonment they could have repaired the damage for less then replacement.

Once upon a time in Merry Old England there were a large number of big fires.

Because the houses were densely packed together built of timber roofed with thatch, and firefighting depended on yokels throwing buckets of water on the conflagration, the authorities often demolished houses in the path of the fire to create firebreaks.

This lead to interesting arguments about insurance cover. Here is how it played out;

Policy holder: My house was damaged in a fire, I am covered for fire. Pay up.

Insurer: No your house was demolished, not burned in a fire. We are not paying.

Judge: The house would not have been demolished but for the fire, therefore it is fire damage. Pay up.

This is called in highfalutin lawyer speak "proximate cause."

Let us go to the present day;

Policy holder: My house has been destroyed as a result of an earthquake, I have earthquake replacement cover. I am going to build elsewhere. Pay up.

Tower: No your house was demolished by Jerry Brownlee driving a bulldozer. We will only pay for the cost of repairing your house before it was demolished.

Judge: ????????

Maybe Towers opinion as to the extent of its losses is wrong. Maybe a judge will have to decide. Maybe if you are covered by Tower and are in the Red Zone you should talk to a lawyer before agreeing to any settlement from Tower.

Boop boop de do

Marilyn

[CJ]

Policy holder: My house has been destroyed as a result of an earthquake, I have earthquake replacement cover. I am going to build elsewhere. Pay up.

Tower: No your house was demolished by Jerry Brownlee driving a bulldozer. We will only pay for the cost of repairing your house before it was demolished.

Judge: ????????

Maybe Towers opinion as to the extent of its losses is wrong. Maybe a judge will have to decide. Maybe if you are covered by Tower and are in the Red Zone you should talk to a lawyer before agreeing to any settlement from Tower.

The govt isn't kicking them off the land (which could invoke your proximity clause), They are making an offer to buy the property. You have the choice to remain on your property, in which case the insurer will pay for the house to be replaced.

I think this is why the govt announcement took so long - they were figuring out the legalese with the insurers. If they have worded it as a compulsory acquistion, then it would be different.

[Jim]

I think it still a while before the share price will reach a trough at about $ 1.40

[JemT]

I would agree with the above- doing a most conservative valuation based on cash flows gave a value somewhere around $2.20, even after taking into account a 20% increase in reinsurance expense and subtracting $30m of christchurch costs.

[RRR]

I feel sorry for the GPG folks who want to sell their stake - the share price keeps going lower for one reason or the other. Me not in a hurry to buy.

[_Michael]

TWR on sharp nose dive with no new updates to market over the last week. Hopefully no new spiders in the closet. Any ideas?

[Hoop]

There's a few new TA spiders Michael.... a good chance the 1.25 support will fail.

[_Michael]

Thanks Hoop

That does not look pretty.

With net tangible asset backing at $1.50 per share you have to wonder what is going on.

There seem to be doing OK with the their insurance underwriting but I do wonder how conservative they are with the substantial investment float.

Looking through last years they seemed to hold quite alot of unrated or "junk" rated bonds for example. And in the last interim report there was a massive (albeit unrealised) decline in financial derivatives to the p&L.

They could take a lead from QBE and go for highly rated corporate bonds.

I am not sure what else could go wrong with them at the moment.

They could lose their status as default Kiwisaver provider which would be problemtatic as they would have no competitive advantage in that area. The govt has flagged already that this could happem - however in saying that the investment business is valued at zero pretty much currently as the insurance business must be worth $1.80 per share anyways...

Or else maybe GPG selling down? Would have thought they would hang around and look for a buyer of the whole company....

[RRR]

GPG's intention to sell its stake (35% - that is huge) is what concerns me the most as a retail investor. It is and will be a forced sale and hence they will have to sell at a discount - they sold TUA at a discounted price! Tower buying back 15-16% of GPG stake with their cash surplus (?) would be nice - just hoping.