Tower Limited has updated its financial expectations for the 2025 financial year (FY25), lifting its underlying net profit after tax (NPAT) forecast to a range of $70 million to $80 million.
This revision comes after earlier guidance placed the expected result between $60 million and $70 million.
The projection is based on the assumption that the insurer’s $50 million allowance for large-scale weather events will be fully deployed.
In the current financial year, the only such event recorded to date is the October flooding in Dunedin, estimated to have cost around $3 million. Tower is also responding to recent storm damage from the Easter holiday period, where it has received close to 250 claims. If costs exceed $2 million, the storm may be classified as a large event under Tower’s criteria.
The revised outlook is largely driven by lower-than-expected claim volumes under normal conditions. The insurer cited extended periods of stable weather, easing inflationary trends, fewer severe residential property losses, and tighter risk assessment procedures as key contributors to improved claims experience.
On the premium side, Tower has lowered its expected gross written premium (GWP) growth to mid-single digits, down from an earlier range of 7% to 12%.
Although customer growth in home insurance remains positive, a shift in policy composition – toward newer homes and less risky vehicle cover – has pulled down the average premium value. Competitive pricing pressures in the local market have further tempered premium expansion.
Tower has also amended its outlook on cost ratios. The company now expects its management expense ratio (MER) to remain below 31%, a revision from its previous estimate of below 29%.
Despite a general downward trend in expenses, the company said the updated forecast reflects strategic spending on long-term initiatives and the dampening effect of lower-than-expected premium growth.
The combined operating ratio is forecast to sit between 82% and 84%.
Tower also noted that reported profit will be affected by non-core costs, including ongoing remediation efforts and a revised provision for legacy claims from the Canterbury earthquakes.
The company pointed to a rise in new over-cap claims submitted by the Natural Hazards Commission (NHC) as a driver of this change. The ongoing resolution of claims from the 2010-11 earthquake series continues to pose challenges across the sector, exacerbated by historical inflation and the discovery of unresolved damage.
Tower intends to provide further commentary and detail when it releases its interim financial results on May 20.
