TWR - Tower Insurance

[Basil]

Just looked it up. Reinsurance was capped at a max claim per one event of $750m in FY24.
Think it's $800m in FY25.
Above that Tower are on the hook for claims that could prove to be an existential event. That exisistential risk needs to be modelled into the valuation but how ?

A true 1 in 100 year event or more likely than that, who knows?

[Poet]

Just looked it up. Reinsurance was capped at a max claim per one event of $750m in FY24.
Think it's $800m in FY25.
Above that Tower are on the hook for claims that could prove to be an existential event. That exisistential risk needs to be modelled into the valuation but how ?

A true 1 in 100 year event or more likely than that, who knows?

Remember though, that earthquake risk is covered up to first $300k +GST per property by the EQC (or whatever it is called nowadays NHC?). This takes a lot of risk off the table

[lorraina]

Only a few years ago Reinsurance companies started to cap their liability.
Question.
Does Tower cap their policies accordingly.?

[snapiti]

Just looked it up. Reinsurance was capped at a max claim per one event of $750m in FY24.
Think it's $800m in FY25.
Above that Tower are on the hook for claims that could prove to be an existential event. That exisistential risk needs to be modelled into the valuation but how ?

Tower have catastrophe reinsurance with an excess of about $12m, this is why they carry a provision of $45m to cover 4 x major events every year. This means that per any one event max cost to the company is about an excess of $12m

This statement is from one of the events in early 2023,
Tower expects further claims as people in affected areas regain access to
their properties and power and communications are restored. While there is
insufficient information to estimate the ultimate cost of Cyclone Gabrielle,
Tower expects it is likely to also trigger Tower's reinsurance for
catastrophe events, with an excess of $11.875m.

Now if the big one struck one must understand that Tower only has a certain share of the market so $800m reinsurance cap per event is reasonably healthy I would have thought, besides that, as already stated EQC have some cover in place already.
Not to mention we live in a nanny state so government will be at the ready to give handouts.
I think you will find it is multiple large events in the one year that hurt Tower the most.
In saying that the big one will see thier SP halved overnight just because of the vagaries involved

[Left Field]

While we all fear NZ's next disaster...... the same could be said for many other countries and the USA is no exception, constantly suffering events such as earthquakes, hurricanes, forest fires, coastal erosion etc.

Consider what Buffet says about his investment in Insurance companies......

"Insurance companies enjoyed some terrific advantages, as compared to manufacturers. Insurers offered a product that never went out of style. They profited from investing their customers' money. They didn't require expensive factories or research labs. They didn't pollute. They were recession-resistant. During hard times, consumers delayed expensive purchases (houses, cars, appliances, and so on), but they couldn't afford to let their home, auto, and life insurance policies lapse. When a sour economy forced them to economize, people drove fewer miles, caused fewer accidents, and filed fewer claims-a boom to auto insurers. Because interest rates tend to fall in hard times, insurance companies' bond portfolios become more valuable. These factors liberated insurers' earnings from the normal business cycle, and made them generally recession-proof."

Buffet's insurance investments started 50 years ago and compounded at 18% annually over that time. More recently in 2019 Buffet purchased 26 mill shares in Chubb insurance for $67 Billion. Chubb operates worldwide.

 

[Left Field]

Only a few years ago Reinsurance companies started to cap their liability.
Question.
Does Tower cap their policies accordingly.?

As I understand it NZ Govt legislation requires Insurance companies to manage their risks (ie policies)  by covering their maximum risk based on a 1000 year event occurring. Hence the reinsurance mentioned above.

[lorraina]

From Antipodean's Sharetrader post;

2) Insurance coverage (at most including Tower) is capped as sum insured value, unliked uncapped cover prior, for most perils including EQ events.

[LoungeLizard]

Assuming no large events, I wonder if we might see a guidance update before the ASM on 11/2 and the vote on the capital return? Last year they upgraded their guidance after 4 months of trading on 14/2.

[Left Field]

Encouraging action on replacement CEO.....

https://www.nzx.com/announcements/445639

Footnote; Former CEO of Tower has been appointed CEO of Milford according to NBR article

[lorraina]

Tower Partners With Finsure
TowerTuesday, 28 January 2025, 12:51 pm
Press Release: Tower

Tower has today announced a new partnership with one of Asia-Pacific's largest mortgage aggregation groups, Finsure, to simplify insurance referrals for customers and advisers.

The partnership will reduce complexity for Finsure NZ advisers, with Tower's unique referral model, ensuring a specialist Tower team member handles the entire lifecycle of the insurance quote process.

Tower MD Partnerships Jonathan Beale says, "We're thrilled to partner with Finsure, a trusted international mortgage aggregation group with a fast-growing presence in New Zealand. This partnership reinforces our commitment to offer Kiwi forward thinking insurance products and services, and simple and rewarding customer experiences; it's great that Finsure NZ's advisers and their customers will now benefit from these offerings too."

In FY24, the growth of Tower's adviser network accelerated by 32% to 3,300 advisers, with a 19% increase in new policies sold via adviser referrals, compared to FY23.

Finsure New Zealand Country Manager Jenny Campbell says, "Our partnership with Tower opens the doors to new, high-quality insurance products and services that will benefit our advisers and their clients alike. We're proud to be partnering with New Zealand's only Kiwi-born and bred insurance company, whose wholehearted commitment to delivering the best for their customers is reflected in our own company values."

Both Tower and Finsure NZ operate in partnership with Vega Mortgages, a top advisory firm offering a range of financial solutions to their customers.

Highlighting the value of Tower's partnership with Finsure NZ, Vega Group Chief Executive and Managing Director, Harry Ferreira says, "Finsure is fast becoming a leading player in the New Zealand mortgage advisory market, and their new partnership with Tower is testament to this. By working together with Tower, Finsure is only set to increase their reach further across the country, delivering simple and effective mortgage services to even more Kiwi."

[Shareguy]

Craig's have just updated their NZ Conviction portfolio and have increased waiting to Tower

 •Increasing Tower (TWR, +2.5% to 5%) – now comfortably back in the NZX50 we see TWR's PE of 7.5x as unjustified (50% discount to peers, 25% discount historically). Benign weather may see an FY25 (Sept YE)  upgrade, a $45m capital return is expected in March.

[lorraina]

I am weighting to see if Craig's Conviction moves TWR's share price....?

[Basil]

Tower be de-risked from cyclone season by late April.  Not sure how anyone can have much conviction about the degree of expected extreme weather in N.Z. in 2025 until then. 

[Sideshow Bob]

I am weighting to see if Craig's Conviction moves TWR's share price....?

If they put all their managed clients into it..........often said the likes of FB/Jardens/Craigs could likely move the market with positive/buy recommendations. Becomes a self-fulfilling prophecy. 

Undemanding metrics currently, but one event could change that.

Looking forward to dividend day tomorrow!! 

[raW tent Buffer]

First guidance upgrade of 2025 just in... Could be looking well in excess of 100m NPAT at end of FY assuming no big disasters.

Very nice