General insurer Tower says it has had a “particularly strong” start to its 2024 financial year, with gross written premium jumping 21% to $194 million in the first four months.
At Tower’s annual general meeting held in Auckland on Wednesday, Chief Executive Blair Turnbull says the company expects gross written premium growth (GWP) to be at the upper end, or even exceed, its guidance range of between 10% and 15% in the full 2024 financial year – excluding revenue from sales of subsidiary operations.
“This has predominantly been driven by rating adjustments to offset inflation, and increasing reinsurance and claims costs, along with good organic growth,” Turnbull says.
“This was helped by Tower’s Partnerships business which saw GWP increase by 32%. Our focus on the New Zealand home insurance market has also resulted in GWP from the home portfolio increasing by 28%.”
Its very similar reasoning to what Tower’s competitor IAG New Zealand provided last week in its half-year results when reporting its gross written premium had risen 18.8% in the six months to December 31 2023. IAG NZ attributed that growth as a response to inflation pressures and reinsurance costs.
Gross written premium is the total amount of money customers are required to pay for insurance coverage on policies issued by an insurer.
It’s a busy time for Tower as a strategic review – which was announced in early December last year – is still underway and the insurer also recently announced the sale of its Vanuatu business to Papua New Guinea’s Capital Insurance Group.
Turnbull and Tower Chairman Michael Stiassny remained tightlipped on Tower’s strategic review during the annual meeting’s speeches.
“The review is progressing well, and a range of options are being considered. However, no decisions have yet been made and naturally, we will update the market at the appropriate time,” Stiassny says.
Tower has also just celebrated its 150th anniversary since first setting up the business in Suva “with one agent and one customer” five years after starting out in NZ.
Accounting for the sales of its Papua New Guinea, Solomon Islands and Vanuatu operations, Tower’s remaining Pacific businesses generated $43 million in gross written premium in the full 2023 financial year.
Stiassny says Tower’s Pacific business is staffed by a local team of more than 250.
Turnbull says Tower has “tightened” its risk appetite in the Pacific and reviewed commercial risks to ensure it writes "the right risks at the right price,” Turnbull says.
Share price 'too low'
Stiassny says Tower has an untouched $45 million large events allowance which is “considerably more” than the insurer had last year.
“Nature willing, we are hopefully well covered for the remaining eight months and with upside still to be had.”
He described the business being in “good shape” and also added that Tower’s share price remains “far too low” and isn’t reflective of the business’s “true value”.
Shares in Tower were sitting at 66.5 cents on Wednesday morning before the market opened and rose to 70 cents after the market opened at 10am and Tower’s meeting got underway.
As of Wednesday, Tower’s shares have risen 14.75% in the last year and 14.37% in the last three.
Turnbull says strengthening the Tower business remains a “priority” for the insurer and plans to complete the transformation of its claims experience by the end of 2024.
“This will include a fully digital end-to-end process with the majority of claims processed and settled in a matter of days,” he says.
“A dedicated large events team which can scale up quickly, including a specialist assessment team with leading tools is also being established.”
Tower measures large events as those which have a net cost to Tower of more than $2 million.
Earnings guidance
Assuming full utilisation of the large events allowance, Turnbull says Tower is anticipating underlying net profit after tax for the full 2024 financial year to be at the upper end of, or exceed, its guidance of between $22 million and $27 million.
Tower also released its net profit targets for the 2025 and 2026 financial years – the 2025 financial year has a target range of $40 million to $60 million and the 2026 financial year has a net profit target of $60 to $80 million.
“It’s worth noting that should we exceed FY24 [full-year 2024] guidance in line with current expectations, this will positively flow through to the FY25 and FY26 target ranges,” Turnbull says.
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