Tower Limited has reported an underlying net profit after tax (NPAT) of $83.5 million for the financial year ending September 30, 2024.
The insurer also recorded a reported profit of $74.3 million, a significant turnaround from the $1 million loss in FY23, which had been heavily influenced by catastrophic events.
The FY24 results were driven by premium growth, operational efficiencies, and improvements in claims management. Gross written premium (GWP) increased by 15% year-on-year to $595 million, and the business-as-usual (BAU) claims ratio improved to 48.1%, compared to 55.1% in FY23.
The management expense ratio (MER) also showed improvement, reducing to 31.4% from 32% in the previous year. Notably, no large weather-related events were recorded in the financial year, significantly lowering large event costs to negative $2.3 million from $55.6 million in FY23.
Customer numbers declined by 2% to 305,000, which the company attributed in part to tightened risk policies for high-theft motor vehicle models.
Reflecting the year’s financial performance, Tower’s board declared a final dividend of 6.5 cents per share, bringing total dividends for FY24 to 9.5 cents per share.
Additionally, the board conditionally approved a NZ$45 million return of excess capital to shareholders through a mandatory share buyback.
Tower CEO Blair Turnbull (pictured above) said the improved results were underpinned by factors including sustained premium growth, a reduction in motor theft claims, and calmer weather conditions that lowered the frequency of house claims.
“This strong result is underpinned by our strategy of delivering simple and rewarding customer experiences combined with our use of digital technology and data,” Turnbull said.
Premium growth was supported by earlier rating increases aimed at addressing inflation, rising reinsurance costs, and higher claims from previous catastrophic events. GWP from house insurance policies rose by 18%, reflecting Tower’s increased focus on the home insurance market.
Turnbull noted that as inflation eased later in the financial year, premium increases were moderated, particularly for low-risk assets, and he anticipated further stabilisation in premium rates.
Operational efficiencies also contributed to the company’s improved performance. Tower’s expanded Suva hub now handles 55% of customer sales and service calls from New Zealand, reflecting the company’s ongoing investments in digitisation and streamlining processes.
Tower’s large event allowance of $45 million for FY24 remained unused, contributing $32 million to underlying NPAT after tax adjustments. This marked a stark contrast to FY23, which saw significant costs from Cyclone Gabrielle and the Auckland Anniversary storm. The company reported that, as of October 31, 2024, 99% of claims related to these events had been resolved.
For FY25, Tower has forecast underlying NPAT in the range of $50 million to $60 million, assuming full utilisation of a $50 million large events allowance. GWP is expected to grow between 10 and 15%, reflecting a balance between rating adjustments and organic growth.
Tower also aims to further reduce its MER to below 29 % through continued digitisation and efficiency initiatives. The company’s conservative approach to large events and its focus on operational improvements are expected to support its financial performance in the coming year.
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