TWR - Tower Insurance

[Shareguy]

Target price increases from $1.46 to $1.67
Rating OVERWEIGHT.
NZX50 inclusion in Dec 2024 or March 2025 but some dog thinks he has sniffed this out more thoroughly and knows better   

Decent volume going through on the NZX. $1.30 held. Only a few days left of the year and I can't see any potential disasters coming. As of today Craig's still saying Dec 2024 or March 2025 for index inclusion. Only regulatory approvals left with Arvida.  Timing being key, so will be interesting if you are right Basil.

[BlackPeter]

Well done.  Craigs $1.67 and Forbar @ $1.78 seem reasonable to me in light of the dominance of the major market players, as noted in link in post #157 above, their metrics and their ongoing determination to get strong returns on capital.   The gate is wide open for Tower to continue to increase insurance premiums at faster than the rate of inflation and get ongoing decent returns on capital in the years ahead.

Absolutely - congratulations to all traders and speculators who were lucky with this stock this year. A friendly god send the climate catastrophies this year to Europe (flooding and wild fires), Asia (heat waves, cyclones & flooding), Americas (tornadoes and wild fires) and Africa (droughts and landslips) - i.e. all good in old NZ, we can cash in - and no doubt this lucky streak will never change!

I recon the challenge for holders is now to get out before increased competition will reduce margins (probably easy to predict) and before the next big climate event hits our shores (latter is harder to predict).

Anyway - anybody who bought in at the bottom and cashed out right now had an opportunity to double their money. This is good.

[LoungeLizard]

Absolutely - congratulations to all traders and speculators who were lucky with this stock this year. A friendly god send the climate catastrophies this year to Europe (flooding and wild fires), Asia (heat waves, cyclones & flooding), Americas (tornadoes and wild fires) and Africa (droughts and landslips) - i.e. all good in old NZ, we can cash in - and no doubt this lucky streak will never change!

I recon the challenge for holders is now to get out before increased competition will reduce margins (probably easy to predict) and before the next big climate event hits our shores (latter is harder to predict).

Anyway - anybody who bought in at the bottom and cashed out right now had an opportunity to double their money. This is good.

Agreed. Not usually my kind of stock - high risk/return - but I got in as the odds lengthened on big event occurring as the year progressed. I think there's more to run yet with index inclusion and a divvy to come so no way would I be selling just yet, but for me it's still a bit too risky as a long term hold. That's despite the insurance industry generally having a golden moment and TWR having already got substantial re-insurance lined up. It'll all be decided by the weather gods I guess.

[Basil]

I recon the challenge for holders is now to get out before increased competition will reduce margins

Have a read of that link I posted @ post #157  There's actually very little competition and the market is dominated by IAG, (which own a large number of brands giving apparent competition which doesn't exist between those brands and Suncorp).  Agree we've been fortunate with the weather this year but you could also say the extremely wild weather of the Summer of 2023 was a once in a several years - decade thing.  (I certainly don't buy the one in 100-year thing) but a cyclone like that and a major deluge that hit Auckland in late January 2023, unlike anything I have ever experienced in my lifetime before in Auckland and I have lived here for just on 50 years...weather that bad certainly doesn't hit all that often.  I'm planning on taking the boat to Gt Barrier Island late January - early February 2025 so I have my fingers crossed for no heavy weather this summer.  That said I agree the reality of climate change is these things will become more frequent but maybe the huge increases in premiums in recent years already fully account for that ?

[Basil]

Decent volume going through on the NZX. $1.30 held. Only a few days left of the year and I can't see any potential disasters coming. As of today Craig's still saying Dec 2024 or March 2025 for index inclusion. Only regulatory approvals left with Arvida.  Timing being key, so will be interesting if you are right Basil.

90%+ chance in my opinion but there's a bit of chatter on the other channel about the increased volumes and a suggestion some institutions are front running the index inclusion, buying and warehousing the stock for the passive index tracking funds.  Who knows whether that talk has substance to it as most brokers still seem to be thinking it's a December or March prospect.

[Shareguy]

90%+ chance in my opinion but there's a bit of chatter on the other channel about the increased volumes and a suggestion some institutions are front running the index inclusion, buying and warehousing the stock for the passive index tracking funds.  Who knows whether that talk has substance to it as most brokers still seem to be thinking it's a December or March prospect.

Yes it's hard to know. Would of thought most of the buying for index funds would be based on certainty. Craig's have an eps of 21 cents for FY24 which is impressive.

The fundamentals scream cheap, even at $1.30. However we all know that the next big event is just a question of timing so I believe caution is warranted.

[Basil]

Caution yes but we also need to caution against something called recency bias. That's probably what stopped me getting in earlier. The huge floods of January 2023 followed by the huge cyclone of Febuary 2023 and their devastating effects for many are still fresh in people's memory so recency bias ( a bias that something really bad that happened recently tends to make us think it will happen again soon) is also something we need to be cognizant of.

If we go back over say the last 10 years, how many of these severe types of events have we had?

Maybe premiums going up so much in recent years means Tower are likely to overcompensate on average for the risk in the years ahead ?

[Poet]

Caution yes but we also need to caution against something called recency bias. That's probably what stopped me getting in earlier. The huge floods of January 2023 followed by the huge cyclone of Febuary 2023 and their devastating effects for many are still fresh in people's memory so recency bias ( a bias that something really bad that happened recently tends to make us think it will happen again soon) is also something we need to be cognizant of.

If we go back over say the last 10 years, how many of these severe types of events have we had?

Maybe premiums going up so much in recent years means Tower are likely to overcompensate on average for the risk in the years ahead ?

The total cost of large weather events for last ten years net of reinsurance was $125m according to last year annual report presentation.
I guess need to add kaikoura eq as well to get a full picture.
Nowadays eqc picks up first $300k plus gst of eq claims and I believe eqc pays the insurance companies to manage the claims on behalf, so you might see scenario where a moderate eq is actually profitable for ins companies

[Basil]

Good info, thanks Poet.  It feels to me like insurance premiums have gone up double digits for a few years now, and given neither IAG or Suncorp are likely to want to pass on any savings from benign weather years anytime soon, maybe the new premium levels more than fully compensate for the effects of climate change ?   

[BlackPeter]

Just hope that not too many people in East Otago are insured with Tower. Otherwise - the best time to sell these shares might be - right now.

https://www.odt.co.nz/news/dunedin/snow-roads-more-heavy-rain-come

Anyway - they made a lot of money in the last handful of months. Nice to think that these earnings might be used for good purpose.

[Scooter]

Just hope that not too many people in East Otago are insured with Tower. Otherwise - the best time to sell these shares might be - right now.

https://www.odt.co.nz/news/dunedin/snow-roads-more-heavy-rain-come

Anyway - they made a lot of money in the last handful of months. Nice to think that these earnings might be used for good purpose.

I think it's a none event.
Firefighters only called out to 34 events.  Maybe some cars damaged but nothing major.