Tower reports profits fall even as house insurance premiums rise

Tower chief executive Blair Turnbull is overseeing a simplification of the insurance business.

RICKY WILSON/STUFF/Stuff

Tower chief executive Blair Turnbull is overseeing a simplification of the insurance business.

Insurer Tower has reported an after-tax profit of $18.9 million, down from $19.3m the previous year.

The decline happened despite the premiums collected by Tower from the households and businesses it insured increasing by 13% in the 12-month period to the end of September.

In that period, policyholders paid Tower $445.6m in premiums, compared to $396m the previous year.

Tower chief executive Blair Turnbull described the result as strong, saying the insurer recorded a 31% rise in its underlying profit, an internal measure companies use to gauge their progress.

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He said Tower had taken decisive actions to combat record inflation, global supply change blockages, and increasing frequency and severity of large claims events.

Growth in both premium and customer numbers continued, he said.

Tower’s profit announcement on Wednesday morning was delayed as the NZX platform was not able to manage the large size of the electronic files the insurer wanted to upload.

Turnbull said supporting customers and communities through the increasing impacts of climate change was Tower’s most important challenge.

Claims for large events were $19m for the 2022 financial year, compared to $13.9m in the previous year, he said.

“These included the one-in-a-thousand-year Tongan volcanic eruption and subsequent tsunami, and multiple storms, and floods across New Zealand,” he said.

The claims cost for Tower from the Tongan volcanic eruption in January was $6.8m.

IAG is not a name familiar to many households, but the many insurance brands it owns are: State, AMI, NZI, Lantern Insurance, Swann Insurance, NAC Insurance, and Lumley.

ROB STOCK/Stuff

IAG is not a name familiar to many households, but the many insurance brands it owns are: State, AMI, NZI, Lantern Insurance, Swann Insurance, NAC Insurance, and Lumley.

It’s not only Tower policyholders being hit by large price rises in excess of inflation, partly the result of rising claims for weather-related events.

Suncorp, which owns Vero and has a majority stake in AA Insurance, in August announced its New Zealand after-tax profits slipped 23% to $165m in its most recent financial year, despite a huge increase in premiums paid by Kiwi home, car and business owners.

The gross written premiums it collected in New Zealand in the 12 months to the end of June increased from $1.87 billion in the previous financial year to $2.13b.

That included the gross written premiums paid by vehicle owners rising from $460m to $527m, and premiums paid by homeowners rising from $616m to $708m.

Suncorp said the rise in its premium income was the result of both winning new customers, but also price rises on its policies.

Australian insurer IAG, which owns State, AMI and NZI, increased premiums collected increased by 7% in New Zealand over the same period, with the growth mostly driven by premium increases for policyholders, investors were told.

IAG published a list of extreme weather event claims costs it said were pushing up costs.

IAG said it planned to implement “targeted pricing reviews”, but did not elaborate.

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