New Zealand-based insurer Tower has revised its market guidance on underlying net profit after tax for the year ending 30 September 2023, from a profit of between $8 million and $13 million to a loss of $2 million and a profit of $3 million, driven by the ongoing challenging claims environment in New Zealand.
The insurer explains that following the Auckland floods on May 9th and revisions to estimates for Cyclones Judy and Kevin in Vanuatu, large event costs, excluding costs of reinstating reinsurance cover, are now $39.5 million, which leaves the firm with $10.5 million of its large events allowance for the remainder of the year.
Tower has settled more than 50% of the claims received from January’s Auckland and Upper North Island weather event and Cyclone Gabrielle.
In May, Tower successfully placed additional reinsurance reinstatement cover in response to the increased estimate for the ultimate cost of February’s Auckland and Upper North Island Weather event.
The company highlights that inflation, motor crime, and supply chain issues have continued to worsen over Q3.
The average cost of motor claims increased by 20% year on year to approximately $3,400. Despite lifting motor insurance premiums by an average of 26% in the last year, Tower’s claims ratio excluding large events had fallen to 55% on 30 June 2023, from 52% on 31 March 2023. Persistent wet weather among other factors is resulting in motor and house claims frequency above historical norms, says the firm.
As well as additional rating increases, Tower is tightening its risk selections. The company is also automating claims management processes, and working closely with suppliers to manage rising costs.
At the end of Q3, year-to-date Gross Written Premiums were up 16.5% on the prior year (excluding Tower PNG), to $385 million.. Accordingly, Tower maintains its guidance for GWP growth in a range of between 15% and 20%.
Tower’s expense ratio improved to 34% at the end of Q3, compared to 36% for the same period last year, due to efficiencies from digitisation and diligent cost control.
Tower’s estimated solvency ratio as of 30 June 2023 is 134%, up from 125% at 31 March 2023.
Earlier this year the company reported a loss of $5.1 million for the half year to March 31, 2023, as costs related to large catastrophic events rose to $33.9 million in this period. The loss compares to a year-ago profit of $3 million, the insurer noted.
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