TWR - Tower Insurance.

[Independent Observer AUNZ]

Can someone please tell me the reasons why Tower haven't paid a dividend in the last few years? They seem to have been doing OK....

Where to start....

They've had regular impacts from Christchurch Earthquake claim deterioration, multiple capital raises to stave off the regulators and takeover attempts, and a large reinsurance litigation case that settled out of court. Worth noting that one of the previous CEOs (Hancock) instigated a share buyback to try inflate the share price... all just before one of those huge Christchurch claim deterioration events... absolutely ludicrous behavior... although he did oversee the instigation of that reinsurance cover which ultimately saved about $20m-ish of balance sheet exposure. They were just now looking good to start paying regular dividends after the acquisition of Youi's policies and their new technology platform now in place before Covid-19 hit. I have no idea what the impacts of Covid-19 are for general insurance though... Insurance is considered an "essential service" so they're still serving customers, but I can only assume somewhat of a slow-down in terms of new policies... but also no cars on the roads and everyone at home means that automobile accidents and burglary claims are all down to near-zero levels.

[dubya]

Where to start....

They've had regular impacts from Christchurch Earthquake claim deterioration, multiple capital raises to stave off the regulators and takeover attempts, and a large reinsurance litigation case that settled out of court. Worth noting that one of the previous CEOs (Hancock) instigated a share buyback to try inflate the share price... all just before one of those huge Christchurch claim deterioration events... absolutely ludicrous behavior... although he did oversee the instigation of that reinsurance cover which ultimately saved about $20m-ish of balance sheet exposure. They were just now looking good to start paying regular dividends after the acquisition of Youi's policies and their new technology platform now in place before Covid-19 hit. I have no idea what the impacts of Covid-19 are for general insurance though... Insurance is considered an "essential service" so they're still serving customers, but I can only assume somewhat of a slow-down in terms of new policies... but also no cars on the roads and everyone at home means that automobile accidents and burglary claims are all down to near-zero levels.

Great. Thanks for that. I saw this in today's paper so thought I'd take a look at them.

https://www.stuff.co.nz/business/120...nterbury-homes

[trader_jackson]

When alot of companies are canceling dividends left, right and centre, I believe TWR will pull through, in fact we may well be looking at double digit gross yield, bit like what HLG use to pay.

[Scrunch]

... but also no cars on the roads and everyone at home means that automobile accidents and burglary claims are all down to near-zero levels.

While domestic burglary claims should be down, what's going to happen to commercial burglary claims? There's almost certain to be some enterprising crim's that have already, or will be breaking into commercial premises as there's a lot less eyeballs on these locations than normal. An added bonus is knowing there's unlikely to be anyone finding the evidence of their naughty deeds for another 3 weeks minimum. I don't know however is this is a big or tiny bit of Towers insurance book.

[Independent Observer AUNZ]

While domestic burglary claims should be down, what's going to happen to commercial burglary claims? There's almost certain to be some enterprising crim's that have already, or will be breaking into commercial premises as there's a lot less eyeballs on these locations than normal. An added bonus is knowing there's unlikely to be anyone finding the evidence of their naughty deeds for another 3 weeks minimum. I don't know however is this is a big or tiny bit of Towers insurance book.

It is almost zero exposure on Tower's book - they only offer small enterprise commercial insurance; things like dairies, small workshops, man-in-a-van type operations.

There is an increased opportunity for other claims though, for things where accidents in the home are the cause.

I expect renewal rates will be down slightly, but not dramatically - its only 4 weeks at this stage. In the longer term a recession will mean less can afford insurance so their ability to compete with others for their share of the dwindling pie will be critical.

None of this changes their expense-base though - so it comes down to whether every dollar received in new business can cover the fixed cost base, even if claim costs are down.

Another unknown is where the reinsurance market is in all this... there could be major cost savings there if the market is extremely soft globally.

[Independent Observer AUNZ]

Great. Thanks for that. I saw this in today's paper so thought I'd take a look at them.

https://www.stuff.co.nz/business/120...nterbury-homes

No problem. The good news is that Tower recently shifted their treatment of this so if they are successful in their claim, it will be a net positive for the bottom line and could support hefty dividends.

[Halebop]

It is almost zero exposure on Tower's book - they only offer small enterprise commercial insurance; things like dairies, small workshops, man-in-a-van type operations.

There is an increased opportunity for other claims though, for things where accidents in the home are the cause.

I expect renewal rates will be down slightly, but not dramatically - its only 4 weeks at this stage. In the longer term a recession will mean less can afford insurance so their ability to compete with others for their share of the dwindling pie will be critical.

None of this changes their expense-base though - so it comes down to whether every dollar received in new business can cover the fixed cost base, even if claim costs are down.

Another unknown is where the reinsurance market is in all this... there could be major cost savings there if the market is extremely soft globally.

I think the potential for triggering restriction of access clauses on Business Interruption policies is a bigger commercial insurer risk than burglaries or theft on material damage policies because law and order is largely being maintained.

If the pandemic does trigger these, the impact on RI rates could be profound. Re-insurers have been referring to the obliquely over the last few days because the risk isn't well understood but some are worried they are on the hook for claims in unexpected ways with governments stepping into the fray with emergency legislation like lock downs and "essential service" restrictions. Not certain yet but we could be seeing the worlds biggest insurable event unfold in slow motion.

[winner69]

Wonder if Tower will do a QBE and have a ‘preemptive’ capital raise

QBE seemed pretty gloomy about the future.

[Independent Observer AUNZ]

Wonder if Tower will do a QBE and have a ‘preemptive’ capital raise

QBE seemed pretty gloomy about the future.

QBE and Tower very different businesses I would have thought.

[tim23]

Gee only had capital raise last year - please not again!