Tower, the New Zealand-based insurer, will not pay a final dividend due to the substantial costs incurred from storms, floods, and cyclones in early 2023.
On Thursday, the company disclosed a loss of NZ$1.2 million for the year, a significant decline from the NZ$18.9 million profit recorded the previous year.
The company's underlying result, which attempts to exclude one-off costs or benefits, dropped over 7% to NZ$7.6 million from slightly over NZ$27 million.
Tower explained that the NZ$1.2 million loss "includes strengthening of the residual Canterbury earthquake and remediation provisions, partially offset by the sale of Tower’s Papua New Guinea subsidiary and its building in Suva.
The company reported that most of its large event claims have been settled, with approximately 84% of claims for the Auckland and Upper North Island weather event and Cyclone Gabrielle, and 88% of claims for Cyclones Judy and Kevin in Vanuatu completed as of November 20th.
Tower noted that its strong rating actions, along with organic growth, led to a 19% increase in gross written premiums (GWP) in 2022-23, while its management expense ratio (MER) decreased from 36% to 32.2% due to improved operating efficiencies.
Looking ahead to the 2023-24 financial year, the company successfully renewed its reinsurance program with $750 million of catastrophe cover, and it also purchased prepaid third-event cover up to $75 million to protect against large event volatility in FY24.
CEO Blair Turnbull stated, “In the year ahead, Tower will continue its focus on delivering targeted customer and premium growth while further improving efficiencies and continuing to streamline the business.”
“While we have certainly faced significant challenges this financial year, our underlying result demonstrates resilience and strategic delivery which positions Tower well for long-term sustainable growth and performance,” Turnbull added.
Tower aims to return to its usual revenue and earnings path in 2023-24, with full-year guidance forecasting underlying net profit after tax to be between NZ$22 million and NZ$27 million (just below the NZ$27.9 million reported for 2021-22 at the top of that range).
“This assumes full utilization of a large events allowance which has conservatively been set at NZ$45 million,” the company noted.
"GWP growth in FY24 is expected to be between 10% and 15%, reflecting continued strong rating actions and organic growth. Digitization and efficiency initiatives are expected to improve MER to between 30% and 32%,” the insurer said.
Tower forecasts a combined operating ratio (COR) of 95% to 97% in 2023-24 (the COR for 2022-23 jumped to 101% from 90% in 201-22 due to the surge in claims).
The company also stated that it will consider resuming dividends in FY24 "if it is prudent to do so.”
