Yep .. warning of turbulence patches potentially headed TWR's way :)
No different to supply chain issues, interest & market demand factors for other stocks ..
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I'll check back when I need to know if I should wear a windcheater or in that case :)
I'm not sure there is such a direct link in those paradigms but recent history has certainly shown large weather events are pertinent so maybe keep us in the loop. Then again, if there were no such events who would buy insurance for such perils?
Oh bugger …..tsunami approaching the North Island
Boats in marinas in danger …didnt tower have a few claims of this sort once before
ETA 5.00pm. These things are mostly non-events but adverse outcomes are possible even if not probable. It was Tutukaka Marina most affected on the last occasion.
But Vanuatu would be first hit, with a warning 1 - 3 metre waves/surges possible. So what happened?
Market announcement release now imminent.
I think the most interesting thing will be what is said about the future of insurance rather than the numbers. The TWR Board will not have been sleeping well pending the two recent further reinsurance placements (it takes time to negotiate, and then dot I's and cross T's) and the risk profile for this country will have been reassessed. TWR has been the leader in risk based pricing and will likely continue to seek to do so, so watch that space.
https://www.nzx.com/announcements/412005
Summary of key HY23 results:
• Gross written premium (GWP) $245m, up 15% on HY22
• Customer growth up 5% to 320,000• Business as usual (BAU) claims ratio 51.6% vs 48.6% in HY22
• Management expense ratio (MER) improved to 35.1% vs 35.8% in HY22
• Underlying net profit after tax (NPAT) excluding large event costs $23.6m vs $18.2m in HY22
• Large event costs $33.9m vs $17.9m in HY22
• Combined operating ratio including large events (COR) 105.3% vs 94.8% in HY22
• Underlying loss including large events $3.3m vs $5.4m profit in HY22
• Reported loss $5.1m vs $3m profit in HY22, including strengthening of the residualCanterbury earthquake and multi-policy discount remediation provisions, partially offset bythe sale of Tower’s Papua New Guinea subsidiary and its building in Suva.
BAU profit static due to higher BAU claims and higher management expenses.
GWP & customer growth not high enough to cover increased costs of doing business.
Only increase in underlying profit due to investment income.
And with so many ‘one in hundred years’ events, it’s it realistic to exclude such events now as abnormals?
No dividends.
Expense ratio down, GWP up, investment income up, FY profit projected despite recent events.
Planning for frequency of events increasing, risk based pricing and actuary response to changing situation with the theft increase.
No dividend is a good decision here, and advised prior to HY results.
Investment income returning to a more normal rate after years of being subdued with fixed interest returns being low. If we are to assume claims events are more frequent and more severe (which is responded to with policy, terms, risk and premium), we should also assume investment income to be more stable and rising over time given the wider environment. It is not unusual or one off for insurance companies to make money from investments.
A tough HY but not many surprises in here.
While it is not a 1 to 1 comparison, TWR.NZX closest comparisons are the listed Australian insurers.
https://www.marketindex.com.au/news/...-to-outperform
wow some downgrade to guidance https://www.nzx.com/announcements/414893
Tower changes guidance, provides Q3 trading update
Tower Limited (NZX/ASX:TWR) has today updated its market guidance on underlying net profit after tax (NPAT) for the year ending 30 September 2023. Full year guidance is revised to a range of between a loss of $2m and a profit of $3m from a profit of between $8m and $13m, due to the ongoing challenging claims environment in New Zealand.
Inflation, motor crime and supply chain issues have continued to worsen over the third quarter (Q3), with the average cost of motor claims increasing by 20% year on year to circa $3,400. Despite increasing motor insurance premiums by an average of 26% in the past year, Tower’s claims ratio excluding large events has deteriorated to 55% at 30 June 2023, from 52% at 31 March 2023. Persistent wet weather and other factors are also resulting in motor and house claims frequency above historical norms.
In conjunction with implementing additional rating increases, Tower is further tightening its risk selection; automating claims management processes; and working closely with suppliers to manage rising costs. It takes 12 months for the full impact of rating and underwriting actions to be seen as they take effect as insurance policies are renewed.
Following the Auckland floods on 9 May and revisions to estimates for Cyclones Judy and Kevin in Vanuatu, large events costs are now $39.5m (excluding costs of reinstating reinsurance cover), leaving $10.5m of Tower’s $50m large events allowance for the remainder of the year to 30 September 2023. Tower has now settled more than 50% of the claims received from January’s Auckland and Upper North Island weather event and Cyclone Gabrielle. The insurer has implemented a dedicated event response function and scaled up its Fiji-based resourcing to ensure remaining large event claims are resolved efficiently.
At the end of Q3, year to date Gross Written Premiums were up 16.5% on the prior year (excluding Tower PNG), to $385m. Accordingly, Tower maintains its guidance for GWP growth in a range of between 15% and 20%.
Tower’s expense ratio has improved to 34% at end of Q3, versus 36% for the same period last year, due to efficiencies from digitisation and diligent cost control.
Tower’s estimated solvency ratio as at 30 June 2023 is 134%, up from 125% at 31 March 2023.