Tower Insurance has reported a net profit after tax (NPAT) of $23.6 million for the year ended 30 September 2014.
While this is a 32% drop on last year’s $34.4 million, CEO David Hancock says the underlying earnings from its general insurance business rose 32.3% to $25.1 million.
“This was the big highlight for us,” Hancock told
Insurance Business today.
“We’re very much a focused general insurer now and as we’ve gone through a number of different divestments, going forward the results will be very clean.”
There had also been strong progress on the company’s Canterbury caseload, with 89% settled as of today. Hancock said this was great for policy holders but also meant de-risking around the reserves.
Dividends went up just over 30% to 14.5 cents with $56.7 million delivered in returns this year.
“We have also announced our intention to do a further buyback of up to $34 million,” Hancock said, adding that this was planned in the first quarter of the 2015 calendar year.
The Pacific results were particularly strong with a 79% increase in NPAT following the devastation of Cyclone Evan in the previous year and now represents almost a third of group net profit, despite only representing 13% or Tower’s policies.
Hancock said the company was actively investigating further expansion opportunities in the Pacific and hoped to have them up and running by next calendar year.
While he wouldn’t be drawn on specifics he said they were territories that Tower did not yet have a presence in but their competitors did; and that they were very similar in law and environment to their other Pacific territories.
Hancock said solid growth in general insurance was particularly encouraging given the significant adverse weather events that continued to impact claims across the industry.
These had cost $14.4 million this year up from $9.6 million in the previous year.
New reinsurance cover had been put in place from 1 October 2014 which covered multiple large events (excluding NZ earthquakes) from $1 million and up to $5 million per event, which was expected to reduc e future earnings volatility.
Industry consolidation had prompted numerous opportunities, he said, not least that competitors would be distracted by what can often be a complex and difficult process.
“I think there’s been some real opportunities around the digital space and technology, and there have also been opportunities around alliances,” he said.
“We see industry consolidation as lowering choice and Tower would like to be in the position to continue to offer a choice of being New Zealand’s only major insurance company that’s owned by New Zealanders so we think that’s an opportunity.”
He said Tower’s move to bring back Full Replacement for Fire had taken the market by surprise and triggered some great feedback.
“Absolutely it did. Many of our competitors had said that it’s not possible, so we’ve shown that there’s heaps of real possibility around that. We responded to demand and to the concerns that people have had out there in the marketplace.
“That’s an innovation and we’ll continue to roll out new ideas. We’ve got a series of new innovations and product ideas that we’ll be rolling out as we’re quite keen to continue to be known as an insurance company that’s highly innovative.”
He also referred to the Tower’s SmartDriver telematics app which was recognised as Innovation of the Year at the NZ insurance industry awards earlier this month.
Industry consolidation had also widened the pool of talent available which was something Tower was keen to take advantage of.
Customer retention and growth along with staff engagement and efficiency featured strongly in the results announcement and for future strategy.
The company hoped to grow revenue by reducing policy lapse rates, selling more products to existing customers and adding new customers.
The company also used the Net Promoter Score methodology which had grown from 6 to 29 in the year to September.
“That’s a big improvement but we’ve got some way to go,” he said, adding that in the Pacific the NPS was 48.
Hancock said according to the
Aon Hewitt survey, staff engagement was up 22.4% from 49 to 60 in 12 months with the next milestone 65 being aimed for.
He acknowledged the recent publicity in the mainstream media regarding an elderly Christchurch client who had become involved in a staged protest outside Tower’s Christchurch offices this week.
He reiterated what Tower had already stated on the case that they hoped to continue direct discussions with her.
“We have to be very mindful of treating each case on its own merit,” he said.
