Tower bosses have reported a net profit after tax of $13.1 million for the six months ended 31 March 2014.
While the figures represented a 70% drop on the NPAT of $44.2 million in the previous corresponding period, that included significant abnormal profit and earnings from the health, life and investment units that were 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.
CEO 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.
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.
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.
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.
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 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.
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.
Both Stiassny and Hancock offered their heartfelt thoughts for the family of team member Blessie Gotingco this morning.
Chairman Michael Stiassny and CEO David Hancock both told attendees at the start of the meeting they and their fellow workers at Tower wanted to acknowledge the ongoing police investigation into her disappearance.
