Tower to raise premium after losses
New Zealand-based Tower has been impacted by severe and unprecedented weather and a settlement of a Peak Re dispute resulting in a half year loss of NZ$11.6 million ($8.04 million) for the half year ended March 31, 2018 compared to a loss of NZ$8.2 million in the same period a year ago.
Tower said that full-year 2017 was the worst year for weather impacts in 25 years and seven months into the full 2018 financial year (ending September 2018), weather and storm impacts are already higher than the full prior year.
“The unprecedented number and severity of weather events will have implications for insurance premiums,” according to a company statement. “Increased claims will see reinsurance costs rise, and as a result, will mean premium increases for customers. Tower is putting in considerable effort and taking all appropriate steps to preserve capital and reduce any volatility from these short-term weather abnormalities.”
The reported half-year loss of NZ$11.6 million was driven by an NZ$16.2 million after-tax impact from Peak Re settlement.
In March 2018, Tower entered into a $22 million settlement agreement with Hong Kong's Peak Re regarding an adverse development cover policy entered in 2015.
Under the agreement, Tower would receive $22 million of the $43.75 million claimed under the reinsurance contract and all sums claimed in the arbitration proceedings. The write off of the residual amount would result in a $15.2 million after-tax impact on profit.
Tower CEO Richard Harding said that while the reported half-year result is disappointing, finalising the Peak Re dispute marked a significant step forward in finalising the legacy of the Canterbury earthquakes.
The half-year results were also affected by an NZ$5 million after-tax impact from the weather events in the first half and slight adjustment to the Canterbury earthquake provisions, resulting in an NZ$2.3 million after-tax impact.
The combined ratio deteriorated to 94.3 percent in the first half of 2018 from 91.8 percent a year earlier.
At the same time, Tower grew gross written premium to NZ$161.0 million in the first half of 2018 from NZ$145.8 million in the same period a year ago.
“The strong growth and positive trends we’ve seen this half have been offset by the resolution of the Peak Re dispute and a number of severe and unprecedented weather events,” Harding said.
“With investment being made in a new IT platform, our focus is now on accelerating the positive momentum we’ve generated and leveraging the powerful platform we are building for further growth,” Harding noted.
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