Tower downgrades profit guidance, completes strategic review
BUSINESSDESK: Tower, the insurance company about one-third owned by Guinness Peat Group, has downgraded its annual profit expectations because of the impact of Christchurch earthquake claims and finished a strategic review.
The Auckland-based company says market expectations of profit for the year ending September 30 should be reduced by $9.4 million "to take into account increases in claims provisioning relating to the February 2011 event".
Tower made a profit of $33.4 million a year earlier and the downgrade amounts to a one-time impact of 3.5 cents a share.
Tower's reinsurance cover has not been used up but ongoing notification of claims, together with an "appropriate" risk margin and allowing for inflation, would "bring total claims and provisions over Tower's $325 million of cover", it says.
The company increased its reinsurance cover to $500 million per event after the Christchurch earthquakes.
It also says it has completed its strategic review which began earlier this year. It included an evaluation of Tower's capital structure, its health, life, investments and general insurance units, and strategic acquisition and divestment opportunities.
It will provide more information on the review next week, managing director Rob Flannagan says.
Tower's shares last traded at $1.84 and have gained about 20 percent this year. The stock is rated 'hold' based on the consensus of five analyst recommendations compiled by Reuters.