TWR - Tower Insurance

[Poet]

I note that nzx listing has pe at 7.1 at current shareprice. $476m capitalization.
My calculations give me pe either
6.6 at reported 2024 npat or 5.6 at underlying 2024 npat.
Why is that? Can anybody shine some light

[Basil]

Not sure Poet, maybe due to confusion around number of shares on issue ?  Craigs issued a note earlier this month which must have been based on the lower number of shares after the capital repayment.  They have FY25 PE at 6.7 at a share price of $1.34  (This assumes full utilization of the $50m extreme weather provision).  Screams "cheep" louder than a cage full of budgies don't you think ?
Net yield 8.6%.  Not safe in my opinion to opine on whether there will be full, partial or no imputation credits with that.
FWIW I bought some more this morning.

[Poet]

Not sure Poet, maybe due to confusion around number of shares on issue ?  Craigs issued a note earlier this month which must have been based on the lower number of shares after the capital repayment.  They have FY25 PE at 6.7 at a share price of $1.34  (This assumes full utilization of the $50m extreme weather provision).  Screams "cheep" louder than a cage full of budgies don't you think ?
Net yield 8.6%.  Not safe in my opinion to opine on whether there will be full, partial or no imputation credits with that.
FWIW I bought some more this morning.

Good for you topping up. I'm more than full atm at 10% of portfolio so not adding.

[Poet]

Not sure Poet, maybe due to confusion around number of shares on issue ?  Craigs issued a note earlier this month which must have been based on the lower number of shares after the capital repayment.  They have FY25 PE at 6.7 at a share price of $1.34  (This assumes full utilization of the $50m extreme weather provision).  Screams "cheep" louder than a cage full of budgies don't you think ?
Net yield 8.6%.  Not safe in my opinion to opine on whether there will be full, partial or no imputation credits with that.
FWIW I bought some more this morning.

And even that doesn't sound right. At midpoint of guided unpat ($75m) I calculate pe of 6.1 assuming full utilization of large events allowance.
I expect the final result to be closer to 5 if benign weather continues, so yes, cheap as chips atm

[Basil]

Yeap, excerpt from Craigs note, trading at just on half its industry peers.  Priced cheaper than yesterday's newspaper I reckon.

TWR 1) currently trades at a
 48% discount to industry peers (25% historically), 2) offers an FY26 gross
 yield of 12.4%, 3) is continuing to demonstrate operational improvements, and
 4) has only used c.$3m of its $50m large events allowance YTD, which could
 present further EPS/dividend upside as the year progresses. For the
 above-mentioned reasons, we retain our Overweight recommendation

[Dolcile]

The PE ratio and yield look attractive.   However, I find it really hard to understand what is the expected long term earnings and how exactly they manage the risk of a large natural disaster.

[Basil]

Took me quite a while to get my head around the whole reinsurance thing. As I understand it,  Their reinsurance rates have dropped as part and parcel of their more accurately priced risk based geographic modelling with their premiums.  That and their large events allowance keeps going up in line with the effects of climate change, last year this provision was $45m and this year $50m.  Hopefully some others will chime in and explain it better than this pretty modest attempt.

[Left Field]

The PE ratio and yield look attractive.   However, I find it really hard to understand what is the expected long term earnings and how exactly they manage the risk of a large natural disaster.

Docile, have you read the last two TWR annual reports? The Chairperson & CEOs comments provide most of the answers you seek.

There was also a press release detailing their reinsurance negotiation success and the positive implications of risk spreading and cost savings. 

Another risk mitigation tactic is to only allocate a small (speculative) portion of your portfolio to TWR. FWIW I started at 5% but it has grown to 10% of my portfolio.

If you are still concerned then TWR may not be suited to you. No issues, lots of other investments out there.

[Poet]

I'm looking forward to hearing tomorrow that underlying HY25 NPAT was above $50m and a 7-8c per share dividend

[Shareguy]

I have sold out of most of my shares including Tower to buy a property. Tower has certainly been a good share to own.

Best of luck to holders

[Basil]

Good luck with your property purchase Shareguy.

It'll be good to get clarity around earnings, the recent commentary regarding historical Christchurch claims, the likely cost of recent floods giving more insight into the remaining level of unused $50m extreme weather provision, the rate of forward gross premium growth, the dividend level and if its imputed.  I think you might be a bit ambitious Poet, but we will know more tomorrow.

[Poet]

Good luck with your property purchase Shareguy.

It'll be good to get clarity around earnings, the recent commentary regarding historical Christchurch claims, the likely cost of recent floods giving more insight into the remaining level of unused $50m extreme weather provision, the rate of forward gross premium growth, the dividend level and if its imputed.  I think you might be a bit ambitious Poet, but we will know more tomorrow.

dividend unlikely to be imputed and there may be some adjustments to reported profit for CEQ and customer remediation but I will be very disappointed if underlying npat is under $50m

[raW tent Buffer]

dividend unlikely to be imputed and there may be some adjustments to reported profit for CEQ and customer remediation but I will be very disappointed if underlying npat is under $50m

I trust you are not disappointed then =)

[lorraina]

20 May 2025
Tower reports strong half year profit
Kiwi insurer, Tower Limited (NZX/ASX: TWR) today reported its results for the half year to 31
March 2025, recording an underlying net profit after tax (underlying NPAT) of $61.7m and a
reported profit of $49.7m.
The strong results were due to continued improvements in business-as-usual (BAU) claims
performance, continued gross written premium (GWP) growth and improvements in the
management expense ratio (MER). Reported profit includes provisions for ongoing customer
remediation-related costs and an increase in Canterbury earthquake cost estimates, due to
Tower continuing to receive more over-cap claims than expected from the Natural Hazards
Commission (NHC).
Summary of HY25:
• Underlying profit $61.7m vs $36.6m in HY24
• Reported profit $49.7m vs $36m in HY24
• GWP $297m, up 4%1 on HY24
• BAU claims ratio 38.1% vs 49.7% in HY24
• MER improved to 30.4% vs 31.3% in HY24
• Large events costs $3m vs -$1.9m in HY24
• Customer numbers grew to 312,000, up from 309,000 in HY24
• Combined operating ratio (COR) 69.7% vs 80.2% in HY24
• Fully imputed interim dividend of 8 cents per share.

[Left Field]

V Happy with TWR result.......great 8c interim divi which will see full yr divi nicely over 10% on my av SP..... with more cap gains to come.

Onwards and upwards....... BAU.