TOWER posts solid half-year result of $13.1 million
TOWER has today reported a net profit after tax (NPAT) of $13.1 million for the six months ended 31 March 2014.
This compares to NPAT of $44.2 million in the previous corresponding period, which included significant abnormal profit
and earnings from businesses that have been divested.
TOWER Chairman Michael Stiassny said the result was solid and an indication of the underlying strength of the general
insurance business, which had been impacted during the period by a number of severe weather events.
“TOWER has made good progress against its key metrics and strategic priorities, and is well advanced in the execution of
its core strategy to deliver growth and sustainable shareholder returns,” he said.
TOWER Chief Executive Officer David Hancock said over the past six months the organisation had been deeply engaged in
executing its refreshed general insurance strategy to provide both an improved experience for customers and continued
strong returns for shareholders.
“We’re an old company with a lot of new ideas about how to better deliver to our customers, and we’re encouraged by the
number of green shoots that are already visible. Customer retention, brand recognition and net promoter score have all
improved over the first six months of the year,” he said.
“Significant work has also been undertaken to take advantage of technology shifts to improve our direct business, launch
new products and services such as our innovative SmartDriver app and provide better value to our customers.”
Gross written premium increased 5% on the previous corresponding period, supported by premium growth to reflect earlier
rises in reinsurance costs. Net earned premium increased 7.7% to $115.6 million.
Mr Hancock said TOWER’s result for the first six months of the year was particularly pleasing given the abnormal weather
patterns that continued to impact the local insurance industry.
Large claim events in New Zealand and the Pacific cost $4.8 million before tax compared to $3.3 million in the previous
corresponding period. Significant New Zealand events in the first half of the year included floods in the South Island
and the impact of Cyclone Lusi.
In the Pacific, despite a cyclone in Tonga and suspected arson activity in the Cook Islands, normalised NPAT recovered
to $2.7 million in 1H14.
Mr Hancock said management would continue to focus on the reduction of cost within the business.
Life insurance business TOWER Life (N.Z) Limited reported NPAT of $3.7 million, well above the full year plan of $2.8
million due to one-off earnings improvement. The business has a closed book in run-off with no new business being
written. TOWER continues to receive approaches about its Life business and will continue to evaluate these.
Mr Hancock said TOWER continued to work hard to deliver value to shareholders.
In January, TOWER returned $52.6 million to shareholders through a voluntary share buy back, taking total capital
returned to shareholders in the last 13 months to $171.8 million. In April, TOWER repaid $81.8 million in bonds to
become debt free.
TOWER has responded to shareholder requests for a cost-effective solution to dispose of small parcels of shares in the
company and has announced a share cancellation programme offering shareholders with fewer than 200 shares the
opportunity to have TOWER cancel them free of any brokerage charges.
Mr Hancock said TOWER remained a very well capitalised business and was carrying $43 million in capital above solvency
requirements at the business level and an additional $35 million at the corporate level.
The regulatory environment is expected to allow the release of this capital for growth or shareholder returns in the
medium-term.
Over the next 6-12 months Mr Hancock said TOWER’s focus would be to:
Drive growth and efficiency through staff engagement;
Unlock significant brand potential through customer service;
Maintain a leading position in attractive Pacific markets;
Deliver financial performance;
Efficiently manage risk and capital for better returns; and
Capitalise on the opportunities presented by industry consolidation.
Mr Stiassny said TOWER remained an attractive yield stock with a dividend ratio at 90%-100% of NPAT. The Board had
determined that a half year dividend of 6.5 cents per share (unimputed) appropriately reflected the company’s
performance and would be paid for the six months ended 31 March 2014.
ends