Tower first-half profit soars 82% as quake, liability costs fall
BUSINESSDESK: Tower, the insurance firm controlled by Guinness Peat Group, boosted first-half profit 83% after the costs associated with the Canterbury earthquakes and policy contract liabilities fell, letting the company lift its dividend.
Profit rose to $23.6 million, or 8.87 cents per share, in the six months ended March 31, from $12.9m, or 4.88 cents per share, a year earlier, the Auckland-based company said.
Tower's policy liabilities dropped to $671,000 in the period from $8.4m a year earlier, while revenue climbed 14% to $295.7m.
The board declared a first-half unimputed dividend of 5 cents per share, or $13.3m, from 4 cents per share a year earlier.
"The group is back on track after the negative impact of the Christchurch earthquakes and challenging economic conditions which combined to create a difficult operating environment," managing director Rob Flannagan said.
"Our priority was to focus on getting the basics right through achieving higher revenue growth while maintaining a disciplined approach to costs."
Earlier this year the insurer flagged a capital return to shareholders after it was outbid by Insurance Australia Group in its pursuit of AMI Insurance, which was bailed out by the government.
Tower said it is undertaking a strategic review of its business segments to add value to shareholders, which may result in "partnerships, merger opportunities, acquisitions, divestments and/or a return to capital".
GPG's one-third stake in Tower is also in play as the investment company winds itself down.
Tower shares slipped 0.6% to $1.62 in trading yesterday, and have gained 7.8% this year. The stock is rated an average "outperform" in a Reuters consensus of analysts, with a median target price of $1.70.
The firm's performance improved across all segments, with health insurance profit rising 4.9% to $6.5m.
General insurance earnings rose 18% to $5.4m, and investments climbed 18% to $3.6m. Its life insurance unit's profit almost doubled to $12.4m.
Tower booked a loss of $3.1m in the latest six months from the Christchurch earthquakes, down from $7.5m a year earlier. Last year it lifted premiums to pay for rising reinsurance costs.
The firm said reinsurers have "indicated a need to review policy terms and underwriting criteria to reduce risk in the region".
Tower's total funds under management, which includes KiwiSaver funds, grew $139m to $4.12 billion from March last year.