TWR - Tower Insurance

[LoungeLizard]

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

Yep, and after the share buyback there will only be something like 340m shares - a lot of head room to pay a special dividend.

[Greekwatchdog]

They might have to visit a drop in premiums to their clients if they haven't looked at this already. Seems a bit on the nose when there is a significant hit they just increase premiums instead of asking shareholders for cash to cover...

Wonder Commerce Commission would think given insurance companies are creaming it, well Tower in the case are..

Food for Thought

[BlackPeter]

They might have to visit a drop in premiums to their clients if they haven't looked at this already. Seems a bit on the nose when there is a significant hit they just increase premiums instead of asking shareholders for cash to cover...

Wonder Commerce Commission would think given insurance companies are creaming it, well Tower in the case are..

Food for Thought

Absolutely - its a free market and Tower is typically overcharging clients and underdelivering in service. Just check where they typically end in insurance company comparisons. The result? Over the last 9 financial years they made in average meagre 2 cents per year per share.

So, sure - maybe they are lucky this year, but this will fix itself soon. Markets are forward looking, i.e. holders better dance very close to the exit and hope its big enough for the expected stampede.

[Poet]

They might have to visit a drop in premiums to their clients if they haven't looked at this already. Seems a bit on the nose when there is a significant hit they just increase premiums instead of asking shareholders for cash to cover...

Wonder Commerce Commission would think given insurance companies are creaming it, well Tower in the case are..

Food for Thought

Here's some food for thought

https://www.nzx.com/announcements/341787

and

https://www.nzx.com/announcements/354245

I guess there are good years and bad years. I don't resent them their good years.

[Greekwatchdog]

Here's some food for thought

https://www.nzx.com/announcements/341787

and

https://www.nzx.com/announcements/354245

I guess there are good years and bad years. I don't resent them their good years.

Fair enough, just from a customer perspective it becomes greedy if there is another Disaster that has a horrendous price tag who gets left with the bill for TWR to sort their financial position out.

[lorraina]

From today's update;
While Tower saw strong customer growth in the first three months of the financial year, a
reduction in average premiums has contributed to lower-than-expected GWP growth. Tower is
seeing a reduction in average premiums due to higher-than-expected proportions of lower risk new
house insurance and motor policies.

Makes very good sense to me.

[Greekwatchdog]

From today's update;
While Tower saw strong customer growth in the first three months of the financial year, a
reduction in average premiums has contributed to lower-than-expected GWP growth. Tower is
seeing a reduction in average premiums due to higher-than-expected proportions of lower risk new
house insurance and motor policies.

Makes very good sense to me.

Will they reduce the premiums by as much as they increase them?

[lorraina]

That could be possible,but unlikely to be probable.

[LoungeLizard]

I guess there's always going to be a glass half full /empty view of insurance companies. They are a necessary evil and we abhor them when they make super profits in the goods times then we moan as shareholders when the return is abysmal or non-existent in the bad. At the moment Tower and the insurance industry are on a roll - anyone who took a punt less than 12 months ago, has doubled their money. Bank the profits or stay in the game. No complaints either way.   

[LoungeLizard]

SP bumping over $1.40 finally, ahead of today's ASM. Q1 performance and upgrade, plus capital return should equate to a bit of SP action in the weeks ahead.

[Left Field]

Details of the TWR cap return approved....

https://www.nzx.com/announcements/448290

The scheme will involve Tower's shareholders:
 • having one (1) share cancelled for every ten (10) shares held (together with all rights attaching to those shares) on the record date. Fractions of a share will be rounded up or down to the nearest whole number (with 0.5 rounded down); and
 
 • receiving a cash sum of NZ$1.1858 for each share cancelled. Australian registered shareholders will receive these funds in Australian dollars at an exchange rate approved by Tower on or about the record date.
 

It's going to be interesting to see how this affects the SP from hereon. 

[Poet]

Details of the TWR cap return approved....

https://www.nzx.com/announcements/448290

The scheme will involve Tower's shareholders:
 • having one (1) share cancelled for every ten (10) shares held (together with all rights attaching to those shares) on the record date. Fractions of a share will be rounded up or down to the nearest whole number (with 0.5 rounded down); and
 
 • receiving a cash sum of NZ$1.1858 for each share cancelled. Australian registered shareholders will receive these funds in Australian dollars at an exchange rate approved by Tower on or about the record date.
 

It's going to be interesting to see how this affects the SP from hereon. 

Yes, it will be interesting.
After the buyback 340m shares on issue with a projected NPAT (in 6 months time) of between $65m and $110m depending on large claims in the next 6 months.

That's between 20c and 32c per share NPAT. At an undemanding PE of 8, shareprice should be between $1.60 and $2.50. It probably won't be, but go figure

[Shareguy]

Yes, it will be interesting.
After the buyback 340m shares on issue with a projected NPAT (in 6 months time) of between $65m and $110m depending on large claims in the next 6 months.

That's between 20c and 32c per share NPAT. At an undemanding PE of 8, shareprice should be between $1.60 and $2.50. It probably won't be, but go figure

Yes agree. The market in my opinion is not taking into account the lower risk profile they have after all the changes. Index funds should also be buying to make up for the share cancellation. Will be interesting given the current market.

[Poet]

It's not my field of expertise so maybe someone more knowledgeable can help.
The day twr starts trading again is 20th March, is that the quarterly rebalance date for index funds?
A fund that has say 1% of money in twr today would only have 0.9% in twr after the cancellation so they will have to buy extras on market. In addition twr sp has risen since entering the nzx50 index last year so maybe twr weighting in nzx50 has risen so fund actually needs to hold more % than it did at last rebalance.
Does this make sense?

[Basil]

It's not my field of expertise so maybe someone more knowledgeable can help.

Certainly not holding myself out as an expert but I have studied these index changes a fair bit over the years and done okay out of them.

The day twr starts trading again is 20th March, is that the quarterly rebalance date for index funds?

Index weighting changes take effect as at the closing match session on 21 March but are known to key market participants when they are announced on the first Friday in the third month of each Quarter when an index change is upcoming, (in this case 7 March) and participants in the know regarding re-weighting, (generally only institutions who subscribe to a service that I forget the name of) have two weeks to adjust their holdings.  A modest possible pending reweighting may explain TWR's relative strength to the market this month.

A fund that has say 1% of money in twr today would only have 0.9% in twr after the cancellation so they will have to buy extras on market. In addition twr sp has risen since entering the nzx50 index last year so maybe twr weighting in nzx50 has risen so fund actually needs to hold more % than it did at last rebalance.

As I understand it any reweighting is decided when its announced, (7 March) and is solely based on historical data that predates that announcement.
In terms of any reweighting I note the price hasn't changed much, up 2 cents, since the date of index inclusion in December when the closing match price was $1.40 but will be based on average market cap this quarter compared to last.   That said, recent entrants to the NZX50 carry very little weight in the index overall and I've been surprised how little the effect is of reweighting in subsequent periods after a company is initially included.  There's more effect from major constituents share price movements, e.g. if FPH really falls out of bed, everyone else gets reweighted up a bit in proportion to their index weighting.