TWR - Tower Insurance.

[ronaldson]

Tower have provided guidance for FY24, FY25 and FY26. They believe that period will deliver an annual increase in Gross Written Premiums of 10 - 15%, which is impressive even if current and ongoing inflation is factored in.

Importantly, they believe the underlying Net Profit After Tax (NPAT), assuming full utilisation of the "large events" allowance in each case, will be in the ranges $22 - 27m in FY24 ( year end 30 September), $40 - 60m in FY25 and $60 - 80m in FY26. I understand that because of past losses no tax will actually need to be paid in cash until FY26, and perhaps only partially in that year. See Southern Lad's post #2013 above for greater clarity.

If achieved ( and the range between the lower and upper figure in each year is necessarily wide, but maybe use the midpoint, so FY24 is $25m, FY25 is $50m and FY26 is $70m ) this is significant change. And the "large events" allowance/provision underpinning this guidance in FY24 is $45m, in FY25 is $50m and in FY26 is $55m. Any unutilised portion of that allowance in any year goes direct to the bottom line. Tower has been obliged to accept larger excesses before catastrophe cover is triggered, to mitigate reinsurance premium costs, but the provisions outlined are generous in relation to historical experience.

Then consider my post #2019 above and the increase in dividend potentially available as a consequence if that NPAT is attained. I think the share price could realistically easily reach $1.50 or even more over that timeframe notwithstanding that some discount needs to be applied for risk inherent in TWR's insurance market-making in an uncertain natural environment as past happenings have demonstrated.

[Rawz]

Why doesn’t TWR invest their float in stocks? Right now would be the best time. Even investing half of it could add another $10m NPAT with ease.

And what happens when rates drop? How do they make up the loss of investment income?

[Lego_Man]

Why doesn’t TWR invest their float in stocks? Right now would be the best time. Even investing half of it could add another $10m NPAT with ease.

And what happens when rates drop? How do they make up the loss of investment income?

Good question. They have a very low risk mandate currently managed by Nikko Funds for them. There is probably scope for them to add a little bit of risk in the fixed income bucket at least?

[Poet]

Their half year ends 31 March. Providing that we don't have any large events before then, the half year result should be NPAT around $36 million (includes half of the annual $45m large events allowance). Pretty impressive given a market cap of $267m and no debt.

[Rawz]

how much will this cost, in terms of the penalty? any insights

MKTUPDTE: TWR: FMA files proceedings on multi-policy discount application

7 March 2024

FMA files proceedings on multi-policy discount application

Tower (NZX/ASX: TWR) advises that the Financial Markets Authority (FMA) today
filed civil proceedings regarding Tower's self-reported failure to correctly
apply multi-policy discounts (MPDs).

As outlined in a market update late last year, Tower anticipated regulatory
enforcement action with regard to its inaccurate application of MPDs and
raised a provision at that time.

Tower has made significant progress towards remediating the around 65,000
customers identified as being owed a refund. Over $9.26 million (including
GST and interest) has already been paid in respect of overcharges of premiums
payable by over 58,900 customers. Remediation payments continue.

The company has also implemented significant checks and balances to determine
and promptly remediate any further incorrectly applied MPDs. These
occurrences are now identified soon after purchase, and in the majority of
cases, without the need for any refund.

Tower Chair, Michael Stiassny noted that while the company is disappointed
that the FMA has filed proceedings, its focus continues to be on identifying
any further actions necessary to prevent overcharging.

"While the Company has acted in good faith, self-reported the issue, and is
undertaking a comprehensive remediation programme, we accept and deeply
regret that customers have been impacted. We apologise unreservedly and will
continue to work in earnest to address outstanding issues," he said.

ENDS

[Poet]

TWR November 2023 update stated likely cost of remediation program 11.2m including an estimated provision for fma enforcement penalty. I think this 11.2 was taken on the chin in last years fy result so shouldn't impact thus year very much If at all

[ronaldson]

Yes. Any shortfall in provisioning assessed on the basis of recent experience will need to be included when the half year results to 31 March 2024 are eventually released in May, but the Financial Statements as at end FY23 had the remaining provisioning both for remediation and for the anticipated FMA enforcement action now commenced as $7.086m. That number is exclusive GST.

What isn't clear from that disclosure was how much of the remediation liability had already been paid at that time (30 Sept) so we can't reconcile that figure to the statement in the announcement that $9.26m ( which confusingly includes GST - and interest although that will have been expected when raising the provision originally) now already paid. But it seems another 6100 customers are yet to be assessed and paid, which is only about 10% of the original 65000. So the latter should definitly be paid out by end FY24 and most by the half year balance date imminent.

My guess would be about $1m of the provision will be required to see off the consequent court action.

So basically I agree with Poet's conclusion above and don't expect any real share price action although it's yet another legacy issue weighing in the balance. The staff resource required to address a gratuitous problem like this will be/have been significant and may delay the touted reduction in MER factored presently. But the only thing not factored in to current guidance would be any needed increase in the actual provision and the announcement avoids any mention.

[Antipodean]

Judgement should be similar to previous incident involving similar FMA action:

https://www.fma.govt.nz/assets/Enfor...d-Judgment.pdf

Which was $2.1m.

[Rawz]

everything is underlying this underlying that. exlude this and that. companies can just report whatever they want lol

Wont matter aye

[Southern Lad]

Note 2.9 to the 2023 financial statements:

"A customer remediation provision of $3.7m was first recognised at 30 September 2022. During the current year, the estimated cost of remediation was re-assessed. A range of possible outcomes was considered, and a mid-point of the re-assessment has resulted in an additional $8.1m being recognised in the current period, which has been offset by payments made during the period. The resulting provision allows for amounts to be repaid to customers and costs associated with any potential regulatory action. The remediation activities are likely to be completed during FY24".