Why the Tower Insurance (ASX:TWR) share price could move lower today

The Tower Insurance share price is on watch today after the Kiwi insurer announced a drop in statutory profit of NZ$12.3 million.
The post Why the Tower Insurance (ASX:TWR) share price could move lower today appeared first on Motley Fool Australia. –

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Kiwi insurer Tower Limited (ASX:TWR) (NZX:TWR) today announced a drop in statutory profit of NZ$12.3 million – this compares to $NZ16.8 million at the same time last year. This figure includes the $9.5 million received from the recently announced Earthquake Commission (EQC) settlement of $42.1 million.

What else did Tower announce

Tower says its investment in digital and data has helped the company grow its gross written premium by 8% to $385 million, and increase customer numbers by 11% to 300,000.

The company says it has improved its loss ratio from 48% to 46% in FY20, which demonstrates its ability to grow the business while managing claims effectively. Loss ratio is used in the insurance industry to represent the ratio of losses (claims paid) to premiums earned.

As mentioned, Tower has received $42.1m from the EQC as part of the New Zealand government’s effort to reimburse insurers for the amounts they spent fixing earthquake-damaged homes in Canterbury in 2010.

Tower says it will not pay dividends, citing Reserve Bank advice for the financial sector to preserve capital in light of the COVID-19 disruption and uncertain economic outlook. It plans to resume dividend payments in the 2021 financial year, subject to market conditions.

Tower’s digital investment

Tower says its investment in digital and data is paying off . Tower CEO Blair Turnbull, who joined the company in August 2020, says the company’s digital and data strategy is a game changer, and is laying the groundwork to transform how the company delivered insurance in New Zealand and the Pacific.

The company has made significant investments in digital and data technology by entering into partnerships with the likes of the University of Auckland’s Science Faculty, Ushur in the US, Amodo in Croatia, as well as existing partners such as Corelogic.

Cost restructuring

Tower focused on reducing costs, moving much of its business online and reducing staff. In May, the company announced plans for 108 redundancies, as part of its wider effort to save NZ$7.2m a year. In the year to September, Tower reduced its staff to 601, from 659 last year.

About the Tower share price this year

The Tower share price has lost 15% in 2020. The share price started the year at 68 cents, and is now trading at 58 cents. At this current price, it commands a market value of $247 million.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Tower Insurance (ASX:TWR) share price could move lower today appeared first on Motley Fool Australia.

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