Tower reports strong start to FY24

Tower reports strong start to FY24 | Insurance Business New Zealand

Insurance News

Tower reports strong start to FY24

Company sets ambitious targets for future growth

Insurance News

By
Roxanne Libatique

Tower Limited has announced a significant improvement in its trading performance over four months at its latest annual shareholder meeting, following an update on its financial guidance for the 2024 fiscal year.

In a release, Tower CEO Blair Turnbull highlighted the company’s strategic focus on digital direct initiatives, effective risk selection, and comprehensive reinsurance as pivotal in overcoming the past year’s challenges.

“Our sharp focus on Tower’s digital direct strategy along with strong risk selection and robust reinsurance has helped the company navigate the challenges of the last financial year,” he said. “Our positive four-month trading performance is driven by strong premium growth and continuing business efficiencies from ongoing digitisation, operational improvements delivered in part by Tower’s hub in Suva, and recent strategic divestments.”

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Key figures

The insurer reported a 21% increase in gross written premium (GWP) to $194 million compared to the same period in the previous year. This rise is attributed to adjustments in rates to manage inflation impacts and the increased costs associated with claims and reinsurance. Customer base growth was also evident, with numbers rising from 315,000 to 319,000 over the year.

Enhanced discipline in cost management alongside GWP growth has facilitated improvements in the management expense ratio (MER), which decreased from 35% in the prior comparable period to 31% in the recent four months.

The business as usual (BAU) claims ratio saw a slight increase to 54% from 52% year-over-year, yet marked a reduction from 59% in the preceding four months, reflecting the positive impact of underwriting adjustments and rate increases for higher-risk assets within motor and home insurance portfolios.

The company did not report any significant events in the period under review.

Performance goals

Tower introduced new medium-term performance objectives, aiming for an underlying net profit after tax (NPAT) between $40 million and $60 million for FY25, and between $60 million and $80 million for FY26.

These goals are indicative of the insurer’s strategy for future growth in customer base and premiums, operational efficiencies, and ultimately, enhanced shareholder returns.

Predictions

Further optimism was shared based on the expectation that Tower might surpass its FY24 guidance, which could positively influence the financial targets set for FY25 and FY26.

On February 14, Tower projected its FY24 underlying NPAT to be at the higher end or above the previously anticipated range of $22 million to $27 million, assuming full utilisation of a $45 million allowance for significant events.

Additionally, GWP is expected to reach or exceed the top end of a 10% to 15% growth forecast, with the combined operating ratio (COR) anticipated to be at the lower end of or better than the 95% to 97% guidance for the FY24 fiscal year.

The possibility of reinstating dividends will be considered following the finalisation of Tower’s half-year results in May. The financial figures provided in the latest update were based on unaudited management accounts as of Jan. 31.