by Niko Kloeten
It said market expectations of its net profit after tax for the year ending September 30 should be reduced by $9.4 million from $50.1 million (19%) to take into account increases in claims provisions relating to the February 2011 earthquake.
This equates to a one-off impact of 3.5c per share.
Tower said the impact of the Christchurch earthquakes continued to involve elements of uncertainty for the company and the Board felt that it was prudent to be conservative when providing for the amounts that will be paid out to affected policy holders.
“While Tower’s reinsurance cover for this event has not been fully utilised, continued notification of claims and the application of an appropriate risk margin, together with an inflationary allowance, will bring the total claims and provisions over Tower’s $325m of cover,” it said.
“Since the Christchurch earthquakes, Tower has increased the limits on its reinsurance program to $500m per event.”
Group managing director, Rob Flannagan, said that Tower remained well capitalised at approximately $475m of equity, well in excess of regulatory capital requirements.
Flannagan also said Tower had concluded a strategic review that began earlier this year that looked at capital structure, its existing four business units (Health, Life, Investments and General Insurance), and strategic acquisition and divestment opportunities.
He said Tower expected to be able to provide further information next week.
This follows comments by 33.6% shareholder GPG in its half-year results briefing last week that it felt the value of Tower's component parts was not reflected in the share price.
"Additionally, we are of the view that the company should affirmatively embark on an immediate process to optimise the structure and composition of its businesses, consistent with the interests of all shareholders," GPG said.
Tower shares dropped 6c (3.3%) yesterday to $1.78, giving it a market capitalisation of $479 million.
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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