The Tongan volcanic eruption and rogue weather have dealt a major blow to Tower's half-year profit.
The insurance company's bottom line was lower following a near doubling in the number of large event claims to $17.9 million, which includes payouts associated with the eruption of Tonga's Hunga Tonga-Hunga Ha'apai volcano and subsequent tsunami, Cyclone Dovi, and the significant rain storms that swept through the North Island in March.
Torrential rain and flooding washed out roads north of Gisborne in March and proved costly for Tower. Photo: Eastland Network
Key numbers for the six months ended March compared to a year ago:
- Net profit $2.9m vs $11.5m
- Revenue $214.1m vs $203.5m
- Underlying profit excluding large events $18.2m vs $17.1m
- Gross written premiums $216m vs $193.9m
- Interim dividend of 2.5 cents a share
Tower's reinsurance programme kicks in after the total cost of large events exceeds $20m, providing an additional $20m worth of cover. It also had "catastrophe cover" which would be triggered if the cost of a single event was above $11.3m.
One-off events aside, Tower chief executive Blair Turnbull said the company's operational performance had improved, following higher customer numbers, lower expense margins and the effective management of inflationary pressures.
"By building deeper, more engaging relationships with customers Tower is experiencing consistent growth in both premium and customer numbers year on year.
"Our digitisation and distribution strategy focused on simple and rewarding customer experiences has seen us welcome another 18,000 customers to Tower and increase gross written premiums by 11 percent to $216 million."
The company unveiled a new pricing model for flood risk in November 2021, saying the majority of its customers were in line for a discount on a portion of their home insurance premiums.
So far the company had transitioned around 70,000 customers to this new pricing model when their policies come up for renewal.
It said it was also planning to add other climate-related risk to its ratings tool in the coming year, which would include coastal inundation and erosion and windstorms.
"By expanding our risk-based pricing policies and focusing on a high-quality reinsurance programme, we ensure Tower remains in the strongest possible position to continue protecting both our customers' and shareholders' interests,' Turnbull said.
Tower reiterated its underlying profit guidance for the year ending June was between $21m and $25m.
The company's board declared an interim dividend of 2.5 cents per share.