Kiwi insurer Tower Limited has posted an underlying net profit after tax (underlying NPAT) of $83.5 million and a reported profit of $74.3 million for the financial year ended September 30, 2024.
This increase was a significant turnaround from the $1 million loss recorded in FY23, which was primarily influenced by catastrophic events.
Tower’s solid FY24 results were due to the firm experiencing no large events in the financial year, as well as year-on-year improvements in business-as-usual (BAU) claims performance, premium growth, and operational and digital efficiencies.
Moreover, the firm’s gross written premium (GWP) increased by 15% to $595 million, while BAU claims ratio sat at 48.1% in the period, compared to 55.1% in FY23.
Notably, as no large weather-related events were recorded in the financial year, this significantly lowered large event costs to -$2.3 million, in comparison to $55.6 million in FY23.
In addition, customer numbers declined 2% to 305,000, from 311,000 in FY23, which the company attributed in part to a tightened risk appetite for high-theft motor vehicle models.
Reflecting the year’s financial performance, Tower’s Board has declared a final dividend of 6.5 cents per share, which brings total dividends for FY24 to 9.5 cents per share.
As well as this, the Board also conditionally approved a return of NZ $45 million of excess capital to shareholders, by way of mandatory share buyback.
Tower CEO, Blair Turnbull, commented: “Continued improvements in claims performance, sustained GWP growth and enhanced business efficiencies along with unusually benign weather in New Zealand and the Pacific, have delivered a positive result for shareholders. This strong result is underpinned by our strategy of delivering simple and rewarding customer experiences combined with our use of digital technology and data.”
Premium growth was also supported by prior period rating increases aimed at mitigating the impacts of inflation, crime and higher reinsurance costs following the 2023 catastrophe events. GWP from house insurance policies increased by 18% in the year, reflecting Tower’s stronger focus on the home insurance market.
Turnbull, added: “We recognise the impact of premium increases for customers. As inflation settled later in the financial year we moved to moderate premium increases, particularly for low-risk assets. With inflation now easing, we expect premium increases to stabilise further.”
Tower’s large events allowance of $45 million for FY24 remained unused as no large events were recorded in the financial year, contributing $32 million to underlying NPAT after tax adjustments.
Looking ahead to FY25, Tower is forecasting for underlying NPAT to range between $50 million and $60 million, assuming full utilisation of a $50 million large events allowance.
GWP growth in FY25 is expected to be between 10% and 15%, reflecting a balance of rating and organic growth, while digitisation and efficiency initiatives are expected to improve MER to less than 29%.
