New Zealand insurer Tower Limited reported a loss of $5.1 million for the half year to March 31, 2023, as costs related to major catastrophic events rose to $33.9 million in the period.
The loss compared with a year-ago profit of $3 million, the insurer said. Costs related to major catastrophic events for HY22 were $17.9 million.
During that period, Tower recorded a gross written premium (GWP) of $245 million, representing a growth of 15% from the same period last year.
The management expense ratio increased to 35.1% from 35.8% in the same period in 2022.
Increased motor theft and higher frequency of motor claims post-Covid contributed to the increase in Business as usual (BAU) claims ratio to 51.6% compared to 48.6% in HY22.
The combined operating ratio including major events was 105.3% compared to 94.8% in HY22. Underlying net profit after tax (NPAT) excluding major event expenses was $23.6 million against $18.2 million in HY22.
Underlying loss including major events was reported at $3.3 million compared to $5.4 million profit in HY22.
Tower’s CEO, Blair Turnbull said, “Investments in technology, operational efficiency and strong reinsurance continue to support Tower’s strength and ability to address external challenges. We are actively managing the effects of climate-related weather through risk-based pricing and product innovations, tracking inflation through targeted rating and underwriting actions and addressing increased car theft with ratings and excess those changes.
“Tower continues to grow premium and customer numbers while lowering our expense ratio. We expect to deliver a full-year profit alongside sustainable long-term revenue and profit growth,” Turnbull said.
Approximately 30% of claims for the Auckland and Upper North Island weather event and Cyclone Gabrielle, and 5% of claims for Cyclones Judy and Kevin in Vanuatu have been completed. Tower is working effectively to settle the remaining claims, most of which are covered by reinsurance.
Tower’s costs for each of the New Zealand catastrophe events were limited to an $11.9 million excess, while the estimated cost of the Vanuatu hurricanes was $10 million net of reinsurance recoveries.
Recognizing the changing risk environment, Turnbull said, “Now more than ever it is important that New Zealand maintains a strong insurance industry for the future. The Tower remains able -focus on careful risk selection and risk-based pricing, which is a fairer way of pricing insurance because customers only pay for the risks that apply to their property.
The insurer said that a storm in Auckland on 9 May, is expected to cost from $4 million to $6 million. In the second half of the year, the Tower still has a large allowance of $10 million to $12 million reserved for such major events.
Tower’s full-year underlying NPAT guidance remains between $8 million and $13 million, dependent on full utilization of the $50 million major event allowance. GWP guidance is between 15% and 20% reflecting organic growth and a strong rating response to meet inflation, increases in reinsurance premiums and higher claims costs. of the motor, the insurer said.
The Tower has decided not to pay an interim dividend and a decision on a full-year dividend will be made when the insurer’s full-year results are finalized.
