Tower lowers annual profit guidance by up to $14 million after North Island weather double whammy

Insurer Tower has reduced its annual profit guidance by up to $14 million following the recent Upper North Island floods and Cyclone Gabrielle.

Tower has reduced its September year underlying net profit after tax guidance to between $18 million and $23 million, down from a previous range of $27 million to $32 million. Last year's underlying profit was $27.3 million.

Tower has also reduced its annual dividend forecast to 5 cents per share from 6.5 cents per share. Last year it paid 6.5c.

Tower says it has received about 4,850 claims to date stemming from the floods in Auckland and the Upper North Island in late January. It estimates the ultimate cost of the Auckland and Upper North Island "weather event" will be between $95 million and $125 million worth of customers' insurance claims.

"Costs for this event will predominantly be covered by Tower’s reinsurance for catastrophe events which has an excess of $11.875 million," Tower says.

In terms of Cyclone Gabrielle, Tower says it has received about 945 claims for damage and is in the early stages of estimating its financial impact.

"Tower expects further claims as people in affected areas regain access to their properties and power and communications are restored. While there is insufficient information to estimate the ultimate cost of Cyclone Gabrielle, Tower expects it is likely to also trigger Tower’s reinsurance for catastrophe events, with an excess of $11.875 million," Tower says.

Its reduced profit guidance "reflects positive actions taken by Tower to prepare itself for future events, including an increase in Tower’s large events allowance to $40 million, up from $30 million, and the expected cost of reinstating reinsurance arrangements."

“Our hearts go out to the many Kiwis who have been devastated by these two natural disasters in quick succession. Tower has been working tirelessly to support customers through this extremely difficult time," Tower CEO, Blair Turnbull says.

"Tower’s solvency position remains strong, despite the occurrence of potentially two catastrophic events so early in the financial year. A decision will be made on whether to pay an interim dividend when Tower’s half year results are approved, in accordance with Tower’s ordinary dividend policy, acting prudently and in light of information available at that time."