Rising building costs and an increase in large house claims have contributed to a drag on Tower’s half year profits.
The insurer recorded a net profit of $12 million in the six months to March 31, down from $14.9m in the same prior period.
Tower chief executive Blair Turnbull said positive growth and an ongoing reduction in expenses had been offset by several factors including an increase in large events and large house claims, rising building costs and lower investment income.
Large events had a $9.3m impact before tax in the half, up from $2.8m in the first half of 2020 and included the large fire at Lake Ohau village and flooding in Napier in late 2020.
While large house claims – those worth over $50,000 – doubled to 52 claims totalling $9m compared to 26 large house claims worth $4.9m
At the same time the average cost of house claims had risen 8 per cent to $4620 reflecting rising building costs.
Underlying profit before large events was $18m, 5 per cent down on the prior period.
Turnbull said Tower’s investments in technology meant it was well placed to respond rapidly to address these challenges.
“We have commenced a review of our FY21 claims experience and will also work with our supply chain to realise efficiencies and manage increases in claims costs.
“These actions will take time to gain traction, however we expect to begin realising benefits in the second half,” he said.
Gross written premiums rose by 6 per cent to $194m despite its Pacific business declining 16 per cent as a result of economic challenges relating to Covid-19.
Tower’s direct business grew 14 per cent while its partnership business rose by 3 per cent and its personal lines market share rose from 8.6 per cent to 9.3 per cent.
Tower’s management expense ratio fell to 36.5 per cent from 39 per cent .
Tower confirmed it would pay a dividend of 2.5c per share on July 14, its first dividend in five years. Its full year dividend will be in the range of 5c to 5.5c per share.
Turnbull said it had formed a number of partnerships to help grow its premiums including commercial relationships with the New Zealand Defence Force, Auckland Council, CSC Buying Group and insurtech start-up Sentro.
It is also underwriting Australian insurance start-up Huddle’s entry into the New Zealand market, a deal announced this week.
Turnbull said the insurer had also signed an agreement with Allianz Partners to launch new products in travel and pet insurance.
“This will support revenue growth and retention.”
Tower also expanded its cover of electric vehicles, e-bikes and e-scooters and is digitising its online boat experience.
Turnbull said its MyTower digital platform now had more than 100,000 customers registered.
“We have a technology advantage and a data focus which sets us apart from our competitors and affords strong long-term growth prospects. Our cloud-based, digital platform enables us to scale quickly as we acquire new business and migrate customers to our advanced technology.
“As a business we have shed our legacy issues and we are acting decisively to address emerging external pressures. Tower ends this half year in a very solid capital and solvency position with a strategy to deliver sustainable shareholder value.”
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