TWR - Tower Insurance

[Basil]

Yes Craig's have eps of $.17 for this year. That report from Craig's was before the latest upgrade. Attractive metrics, then you have the index inclusion. Can you recall how much index inclusion added to Turners?

It's hard to say for sure because arguably the Turners inclusion, thanks to some timely and loud barking from some dog, was well and truly telegraphed long before it happened, and the share price went up quite a bit in the months before the formal announcement.  I think it's fair to say it added about 10%, unfortunately, some of which has been given back since.  HLG index inclusion last year was good for 27% by my calculations because it was very illiquid.    Generally, in my experience over the years inclusion is worth 5-25% on the share price of the incoming constituent and some downside on the one exiting.  The HLG event and gain thereon was quite unusual, not that I am complaining lol.

All that said, some of the index gain might already be in the TWR stock price due to anticipation because it's fairly common knowledge it's in the box seat for this pending change.

[Shareguy]

It's hard to say for sure because arguably the Turners inclusion, thanks to some timely and loud barking from some dog, was well and truly telegraphed long before it happened, and the share price went up quite a bit in the months before the formal announcement.  I think it's fair to say it added about 10%, unfortunately, some of which has been given back since.  HLG index inclusion last year was good for 27% by my calculations because it was very illiquid.    Generally, in my experience over the years inclusion is worth 5-25% on the share price of the incoming constituent and some downside on the one exiting.  The HLG event and gain thereon was quite unusual, not that I am complaining lol.

All that said, some of the index gain might already be in the TWR stock price due to anticipation because it's fairly common knowledge it's in the box seat for this pending change.

Great info, thanks Basil.  Have a good position. Added more today.

[Shareguy]

Bodes well

https://www.interest.co.nz/insurance/129331/iag-nz-chief-executive-amanda-whiting-says-insurer%E2%80%99s-annual-results-showing-41

[winner (n)]

Index inclusion announced on Friday?

That would be cool

[LoungeLizard]

Index inclusion announced on Friday?

That would be cool

It would be the icing on the cake, but maybe a bit soon? SP likely to see a bit of action though this week I think

[Basil]

As I cautioned in another thread, not sure Forsyth Barr have their index exit considerations regarding lack of liquidity in line with the Dow Jones index liquidity calculation methodology.   Not the first time they have called for an index exit on liquidity grounds and it hasn't happened so it's best to treat any future calls they make in that regard like the boy who cried wolf.  They'll be right one day, but when is frankly, anyone's guess.

No change.  The only one to get a little boost this time might be Santana minerals, (I hold some), which is added to the all companies and small companies indices https://api.nzx.com/public/announcement/437634/attachment/426689/437634-426689.pdf

[Crackity]

Announcement to ASX - 7.20pm NZ time - nice stuff Tower......



Strategic review concludes

In December 2023, Tower commenced a strategic review exploring options to maximise value for
all Tower shareholders and optimise its capital structure to enhance competitiveness in the market.
As part of this process, the Company and its financial advisors Goldman Sachs engaged in wide-
ranging discussions with several parties regarding potential opportunities including partnerships,
risk transfer solutions and alternative ownership and capital structures.
While some of these discussions provided valuable insight and perspectives for Tower's business,
none advanced to the formal proposal stage. Consequently, the Board has decided to conclude the
strategic review.
The strategic review process did identify several initiatives including potential quota share
arrangements, that could be employed to support future growth if required.
Tower Chair, Michael Stiassny said the Board's objective in undertaking the strategic review was to
ensure the Company's ownership and capital structures remain optimal to deliver long-term value
to all shareholders.
"We have determined that the best course of action at this time is to continue executing our current
business strategy under the existing ownership structure. Although the strategic review has been
concluded, the Board remains open to considering any future proposals or opportunities that align
with the best interest of all Tower shareholders," he said.
The Company will also keep pursuing organic growth opportunities that deliver accretive value.


RBNZ removes licence condition

As of 16 August 2024, the Reserve Bank of New Zealand (RBNZ) reduced Tower's minimum
solvency margin from $15m to $0.
Level 5, 136 Fanshawe Street
Auckland 1142, New Zealand
ARBN 645 941 028
Incorporated in New Zealand
The removal of the additional solvency margin requirement recognises Tower's risk and capital
management processes, solvency position, fewer remaining Canterbury earthquake claims and the
materiality of those claims diminishing significantly over time.
Based on unaudited management accounts, Tower Limited's (Parent) adjusted solvency margin as
at 30 June 2024 was $147.2m.
Tower's current internal capital management processes and dividend policy set a target solvency
margin which is higher than the regulatory minimum required by the RBNZ. Therefore, this
reduction will not directly impact dividends or other capital management actions.
Guidance reaffirmed and intended dividend
As advised on 8 August 2024, Tower expects to report underlying net profit after tax (NPAT) of
more than $45m for the financial year ending 30 September 2024. In addition, if no large events
were to occur in FY24, underlying NPAT would be increased by an additional $32m ($45m less tax).
In accordance with Tower's ordinary dividend policy of 60-80% of adjusted earnings, the Board
intends to pay a final dividend of 5 cents per share provided it remains prudent to do so. This would
bring the full year dividend to 8 cents per share.
"The Board is mindful that the Company continues to remain focused on delivering sustainable
growth, satisfactory and proportionate profits, and consistent dividends in the future,
" Mr Stiassny
said.

Return of capital proposal

As a result of work undertaken as part of the strategic review of Tower's capital structure, assessing
current opportunities, the sale of Pacific subsidiaries, and simplification of its business, the Tower
Board has determined it is in shareholders' best interests to return excess capital to them.
The Board has approved a return of NZ$45m of excess capital to shareholders, by way of
mandatory share buyback. The return of capital is expected to deliver meaningful earnings per
share accretion to Tower's shareholders.
The return of capital will be conducted as a scheme of arrangement, and will be subject to:
• Receiving High Court approval of the arrangement; and
• Shareholder approval at the Tower Annual Shareholder Meeting in early 2025.
In addition, the return of capital will be conditional on:
• Tower receiving confirmation from the Inland Revenue Department (IRD) that the capital
return is not in lieu of a dividend;
• Tower continuing to satisfy solvency and prudential capital requirements, including under its
capital management process, up to the time the capital return is given effect; and
• The Tower Board remaining satisfied up to the time the capital return is given effect that it
remains prudent to undertake the capital return.
Given the importance of IRD confirmation, Tower will seek this before initiating the Court process.
For the avoidance of doubt, this capital return

[Left Field]

Good work Crackity...... I had a diary note expecting a TWR update yesterday and wondered why it didn't eventuate.

Seems by your post that it turned up with ASX, but not NZX (or after NZX business hours)....... mere technicalities I guess?

Anyways the news is good for holders....

"In accordance with Tower's ordinary dividend policy of 60-80% of adjusted earnings, the Board intends to pay a final dividend of 5 cents per share provided it remains prudent to do so. This would bring the full year dividend to 8 cents per share.

ALSO a $45 mill 2025 share buyback to further improve EPS for holders.... all subject to a shareholder/IRD approval etc.

Great news for holders.

[Basil]

I have a thing about news releases late on Friday after market close. My theory which has stood the test of time is this is something companies do when releasing news it thinks the market won't like.

Maybe Mr market was expecting more from the strategic review such as for example an on market buyback and maybe expectations were very high for September NZX50 inclusion?

Share price reaction next week will be interesting.
Disc: Holding approx 2.5% portfolio allocation

[winner (n)]

All that spare cash ....suppose better to give to shareholders rather than give customers back some of the excessive premiums they've been charged

[Scooter]

I have a thing about news releases late on Friday after market close. My theory which has stood the test of time is this is something companies do when releasing news it thinks the market won't like.

Maybe Mr market was expecting more from the strategic review such as for example an on market buyback and maybe expectations were very high for September NZX50 inclusion?

Share price reaction next week will be interesting.
Disc: Holding approx 2.5% portfolio allocation

Hey Basil.
Yes news on a Friday after market closes is usually bad news but in this case it looks like they were waiting to see if there would be a inclusion into nzx50 as that ups the price and finding the 10% for the payout a little harder if the price jumps to $1.50.   I still think if they are going to do the payout they better be quick as it's going to start moving again on Monday.  Happy holder

[Shareguy]

From Craigs

In strong contention for index inclusion from Dec-24
Based on our analysis of the NZX50, we do not expect TWR to enter the
index in the upcoming Sep-24 rebalance due to failed liquidity in the Mar-24
quarter. However, we we see a strong possibility of TWR being included at
the Dec-24 rebalance.

[Poet]

Anyone care to speculate on what this extract from the PR means?

It has me stumped.

''The strategic review process did identify several initiatives including quota share arrangements that could be employed  to support future growth if required''

[Shareguy]

Anyone care to speculate on what this extract from the PR means?

It has me stumped.

''The strategic review process did identify several initiatives including quota share arrangements that could be employed  to support future growth if required''

What is Quota Share Reinsurance?

Quota share reinsurance is a type of reinsurance agreement in which the insurer cedes a fixed percentage of each insurance policy to the reinsurer. This means that the reinsurer is responsible for paying a fixed percentage of the losses incurred by the insurer, and also receives a corresponding percentage of the premium. Quota share reinsurance is often used by insurers to reduce their risk exposure, while still retaining a portion of the premium. For example, an insurer has a quota share agreement with a reinsurer for 30%. The insurer collects $10,000 in premiums and pays out $5,000 in claims. The reinsurer receives $3,000 of the premium payments and is responsible for covering $1,500 of claims.

[Basil]

So what effect will the compulsory buyback have on eps ?

Forbar reckon market cap at $1.12 is $425m on 379.48m shares and their FY26 guidance, $70.3m after tax (the first full year effect on eps after the buyback), is 18.52 cps, (that's their forecast before this buy-back was announced).  $45m at, (just sticking with $1.12 to make the maths easy), reduces the number of shares on issue by 10.58% (40.15 million shares) and there would be 379.48-40.15m = 339.33m shares remaining.  $70.3m NPAT on 339.33m shares = 20.72 cps = 11.9% improvement in eps.  FY26. Forward PE at $1.14 = 1.14 / .2072 = only 5.5 !  Cool as, bargain of the century some would say but how on earth do you forecast profits in this industry with the number and extent of future extreme weather events totally unknown?
Holding mine mainly as a hedge against their significantly increased insurance premiums.