TWR - Tower Insurance.

[Rawz]

Hey Rawz - HY24 now done and dusted.

I wonder how much of the "large events" allowance has had to be expensed? Very little by my reckoning, and hence the results announcement should be very positive, notwithstanding the multi policy discount refunds issue (which must surely be 95% dealt with now) and related FMA court action.

An optimist might even think a resumption of dividend is probable!

TWR historically is a serial underperformer. Being an investor in TWR over the last 10 years has been painful. Maybe more painful over the last 5 years as there has been so much hope that finally the business will live up to its potential but year after year there is one reason or another why they cant produce the profits they should and pay the dividends they should.

However, if one can look through the earthquake stuff, EQC cap raising requirement, settlement with reinsurers, capex requirements + rollout of new cloud based platform, grappling with building cost inflation mismatch on premiums, back to back 100 year events then this is a stunning buy

[Rawz]

I now do not believe Goldman will find a buyer for TWR. If Bain capital are not willing to takeover this beast then why should someone else?

I figure TWR needs to deliver a series of strong profits before any outsiders will think about a takeover. That series about to start with this FY

[winner69]

800mm in 60 hours in forecast

That's a lot of rain

Keep safe

[Rawz]

800mm in 60 hours in forecast

That's a lot of rain

Keep safe

Should I sell?

[ronaldson]

Should I sell?

No, buy when the rain is lashing down and the TV news has pictures of small boats rescueing people.

[Lego_Man]

No, buy when the rain is lashing down and the TV news has pictures of small boats rescueing people.

Sell the forecast, buy the storm.

[Rawz]

Half year just gone and we probably can assume no cash from the large event kitty ($45m) has been used. So add half of it to forecast underlying profit of $27m (top of range) and the new unpat is $49.5m.

Thats EPS of $0.13 and on SP of $0.69 means its trading on a forward P/E of 5.29.

Seems very cheap but maybe cheap for a reason as many have been to this rodeo before and have been disappointed year after year.
Is this the best investment on the NZX or is it just my turn to be disappointed? lol

FY23 saw record large event claims against GWP of 7.02%. Avg before that in prior few years was 2-4% of GWP. FY19 must have been a lovely year with only $1m of large event loss equaling 0.28% of GWP.
The FY24 / FY25 / FY26 guidance provided by TWR have used similar 7-7.5% ratio to GWP for their large event allowance, I.e. in line with FY23 very bad year with the floods, cyclone etc. I do not know what industry avg is but if that large event % to GWP is more like 0.28%-4% which the company experienced in FY19/20/21/22 then profits in the coming years will be humongous and price is a multiple of 2-3 times FY26 profits.

I think the downside risk here is low, maybe SP goes to 59/60cent level if it gets really bad. But if it goes really good then SP should be in for one heck of a re-rate and go to $2.60 type thing.
Anyways TWR is a serial disappointment so unsure how it goes. I just feel it's a low risk of losing much money here but good chance to get a bag or two. Thoughts?

[kiwikeith]

Half year just gone and we probably can assume no cash from the large event kitty ($45m) has been used. So add half of it to forecast underlying profit of $27m (top of range) and the new unpat is $49.5m.

Thats EPS of $0.13 and on SP of $0.69 means its trading on a forward P/E of 5.29.

Seems very cheap but maybe cheap for a reason as many have been to this rodeo before and have been disappointed year after year.
Is this the best investment on the NZX or is it just my turn to be disappointed? lol

FY23 saw record large event claims against GWP of 7.02%. Avg before that in prior few years was 2-4% of GWP. FY19 must have been a lovely year with only $1m of large event loss equaling 0.28% of GWP.
The FY24 / FY25 / FY26 guidance provided by TWR have used similar 7-7.5% ratio to GWP for their large event allowance, I.e. in line with FY23 very bad year with the floods, cyclone etc. I do not know what industry avg is but if that large event % to GWP is more like 0.28%-4% which the company experienced in FY19/20/21/22 then profits in the coming years will be humongous and price is a multiple of 2-3 times FY26 profits.

I think the downside risk here is low, maybe SP goes to 59/60cent level if it gets really bad. But if it goes really good then SP should be in for one heck of a re-rate and go to $2.60 type thing.
Anyways TWR is a serial disappointment so unsure how it goes. I just feel it's a low risk of losing much money here but good chance to get a bag or two. Thoughts?

I had similar thoughts and have owned TWR twice before and just got fed up waiting. It just seemed like these once in a hundred year events appeared to be happening every 2-3 years. So get ready for another flood, or hailstorm or eathquake etc etc to come along soon

[ronaldson]

It is correct that the first half of FY24 will be a very good result when announced in May.

On the other hand I expect there will be further provisioning for the ChCh event, the multi-policy discount fiasco and the related FMA court proceeding, along with the long tail of cyclone Gabriel and the Auckland floods. So more housekeeping will soak it up yet one more time. But that will "clear the decks" and if the second half is equally free of "large events" then for the first time in more than a decade TWR will finally be in good shape. But that is weather/earthquake/volcanic dependant and needs fingers crossed because we are exposed on all those fronts.

Even the rest of this week may tell a tale!

[Southern Lad]

Half year just gone and we probably can assume no cash from the large event kitty ($45m) has been used. So add half of it to forecast underlying profit of $27m (top of range) and the new unpat is $49.5m.

Thats EPS of $0.13 and on SP of $0.69 means its trading on a forward P/E of 5.29.

If the large events allowance isn't used at all, there will be a tax effect on the saving. At a 28% tax rate, this would add $32.4m to the NPAT for the full year.

So for the half year, the underlying NPAT might be $27m + $32.4m / 2 = $29.7m.