TWR - Tower Insurance

[Poet]

I trust you are not disappointed then =)

🤑
Amazing result
Go Tower

[Basil]

Really happy with the result.  Absolutely stoked with the 8 cps dividend and the fact it IS fully imputed.
Presentation is here  https://api.nzx.com/public/announcement/451862/attachment/443631/451862-443631.pdf
I note from the call notes they are targeting a return to ~ 15% Gross premium level's by FY27.
I also note large event allowance including the recent Cyclone Tam has only been used to the extent of $7m, so $43m remaining ( ~ 4 months of the year to run) and cyclone season is now well and truly over.

I'm expecting a very strong result for the full year including a large part of that unexpended remaining large events allowance and if we get another 8 cps fully imputed dividend that 16 cps fully imputed = 22.22 cps gross (16/0.72) or a 15.4% gross yield.  On my goodness...

You've got to love that all this strong growth is now on 10% less shares on issue really boosting eps even further.

Looking at the half year underlying profit after tax of $61.7m on 342.55m shares on issue after the capital return that's eps of a whopping 18.01 cps.   I'm tempted to annualize that and work out the PE but I will leave that pleasure for others lol...oh all right then, its 4.0 on a share price of $1.44.

[Poet]

Really happy with the result.  Absolutely stoked with the 8 cps dividend and the fact it IS fully imputed.
Presentation is here  https://api.nzx.com/public/announcement/451862/attachment/443631/451862-443631.pdf
I note from the call notes they are targeting a return to ~ 15% Gross premium level's by FY27.
I also note large event allowance including the recent Cyclone Tam has only been used to the extent of $7m, so $43m remaining ( ~ 4 months of the year to run) and cyclone season is now well and truly over.

I'm expecting a very strong result for the full year including a large part of that unexpended remaining large events allowance and if we get another 8 cps fully imputed dividend that 16 cps fully imputed = 22.22 cps gross (16/0.72) or a 15.4% gross yield.  On my goodness...

You've got to love that all this strong growth is now on 10% less shares on issue really boosting eps even further.

Looking at the half year underlying profit after tax of $61.7m on 342.55m shares on issue after the capital return that's eps of a whopping 18.01 cps.   I'm tempted to annualize that and work out the PE but I will leave that please for others lol...oh all right then, its 4.0 on a share price of $1.44.

Certainly exceeded my expectations by some margin - and particularly with them being able to fully impute the dividend. Full year result should be a boomer especially since we shouldn't see those non-underlying items being so large - EQC re-opens will feature for some time yet but hopefully less $$ than in the first half and we definitely shouldn't see a repeat of the additional $5m for customer remediation that is included in the HY.
Given continuing benign weather, I'd expect FY underlying NPAT to be above $120m and reported NPAT above $105m Final dividend in the region of $12c per share.

[Dolcile]

I'm a bit surprised this hasn't moved higher than it has!   Thought it was good buying at 1.53 this morning but seems I could have got some cheaper!

[Basil]

Certainly exceeded my expectations by some margin - and particularly with them being able to fully impute the dividend. Full year result should be a boomer especially since we shouldn't see those non-underlying items being so large - EQC re-opens will feature for some time yet but hopefully less $$ than in the first half and we definitely shouldn't see a repeat of the additional $5m for customer remediation that is included in the HY.
Given continuing benign weather, I'd expect FY underlying NPAT to be above $120m and reported NPAT above $105m Final dividend in the region of $12c per share.

Thanks for your thoughts Poet.  Yes, paying full tax now so no reason whatsoever future dividends can't be fully imputed.  Gosh, a final divvy of that size in December just before Christmas would be most welcome.  Metrics are compelling to say the least !

[Basil]

Rawz on the other channel. Tomorrow new broker targets will come out all over $2 per share.

Come June/July TWR will upgrade FY25 guidance which will be 3rd upgrade.

Broker targets will then be upgraded again.

We can sit back on the huge div yield waiting for it to play out.

Couldn't agree more plus don't forget the NZX50 index rebalance a month from now on 20 June due to 25% greater free float of shares.

[Poet]

Couldn't agree more plus don't forget the NZX50 index rebalance a month from now on 20 June due to 25% greater free float of shares.

Hmm, not quite 25%. There have been a couple of new SSH notices since the Bain sell down. If I'm not mistaken any holding above 5% is excluded from free float calculations. Notwithstanding that though, you are right, the index rebalance will increase the weighting of TWR and necessitate index funds to top up.

[BlackPeter]

Thanks for your thoughts Poet.  Yes, paying full tax now so no reason whatsoever future dividends can't be fully imputed.  Gosh, a final divvy of that size in December just before Christmas would be most welcome.  Metrics are compelling to say the least !

True, forward metrics looks compelling if we forget the past and assume that things will go from here only into one direction: upwards, as they always do, don't they?

Trying to learn from the past - and Tower used to be a heavily cyclical company with a tendency of extensive flatlining on very low earning levels including several years of loss making. What did they change to avoid cycling back into this misery?

Their average annual EPS since 2016 is a measly 4 cents per share and year!

Not quite sure which formula to use to turn this into an undervalued company ... but anyway - I hope holders enjoy the good times and find the exit before the music stops ;

[Basil]

Hmm, not quite 25%. There have been a couple of new SSH notices since the Bain sell down. If I'm not mistaken any holding above 5% is excluded from free float calculations. Notwithstanding that though, you are right, the index rebalance will increase the weighting of TWR and necessitate index funds to top up.

Not sure how it works mate.  For example the Forsyth Barr SSH is for shares they're holding as custodian for lots of clients so does that get excluded from free float calculations ? I have no idea.

Just a thought BP, maybe try reading the presentation, I posted a link in post #376 above.  There's a lot in there to enhance your understanding of how the company has changed, if you're really interested ?

[Left Field]

Crikey, just over a year ago I was looking for a 'finance stock' to add to my NZ portfolio.

Looked hard at HGH, but v happy to have chosen TWR.

Capital gains as per the chart below, plus what looks set to be at least a 16% div yield this year (ForBar updated estimate,) for those of us fortunate enough to be holding at under $1.00 av SP.

Naaaice.... onwards and upwards.

[BlackPeter]

...

Just a thought BP, maybe try reading the presentation, I posted a link in post #376 above.  There's a lot in there to enhance your understanding of how the company has changed, if you're really interested ?

I did. And yes, they describe as well some costsaving measures (which is good). It sounds as well that they are getting more sophisticated in assessing and charging for risks. Only time (and the next black swan) will tell, whether they got it right.

However - the biggie in their savings this year was peaceful weather, and this is something you hardly can attribute to improved management, can you?

Anyway - maybe I am just suffering confirmation bias. In the past I have been badly burned by holding shares of a small insurance company with roots in the islands (CBL), with a management team which compensated its (accounting and insurance risk) incompetence with overconfidence. They did not even need a black swan to kill the company, they just missed (or ignored) a long tail of claims ...

Wishing holders all the best and that this other small insurance company from the island is better equipped and that black swans and long tails stay off their books. But anyway, I am sure that you won't do a couta on them anyway.

[Basil]

LOL, it crossed my mind to go hard or go home because of the truly compelling metrics BUT discipline with portfolio allocation is the name of the game when one is close to retirement, as there's simply isn't much time to fix one's mistakes, perhaps something a former poster on here should have always kept in mind.

Sure, benign weather has been a huge help with this result, but offsetting that to some extent is legacy issues with Christchurch earthquake.  If you extract the net positive effect of both out of this result, the metrics are still compelling but yes, I acknowledge at any point investors have the potential to face up to another major black swan event, so one needs to factor that into their investment thinking too.

Look, to be honest mate, I was a "doubting Thomas" for a long time too which is why I was slow to get on board.   Had nagging doubts if the rate of their premium increases would be sufficient to keep up with the risks incumbent with climate change, among other things, but they do seem to be taking good steps towards risk mitigation and measuring those risks more carefully and charging appropriate premiums.

Thanks for your good wishes BP.  I acknowledge one does need a bit of good luck when it comes to investing in insurance companies.  I'm genuinely sorry to hear of your awful experience with CBL. I totally understand how that makes you gun-shy on this sector.  Once bitten, twice shy.

[Turkey]

Look, to be honest mate, I was a "doubting Thomas" for a long time too w

Yes Basil good to acknowledge you past sins...lol

TWR was topic d jour at one of those Xmas oyster scoffing events many moons ago and you certainly poo pooed it like a beagle that ate a chocolate bar...

However like a very good doggy...the sense of a good feed got the better of you and now you are a cheerleader

Best of Luck with TWR.

I have a very small holding since 2019 @0.56....it was a very slow burn in the early years but certainly has come to life in the last couple of years...so maybe your timing is good.

[Basil]

LOL mate, I remember that happy occasion very well.  Quite some years ago and I gave poor old Ronaldson so much negative feedback I'm surprised he still hung in there lol.  If I recall correctly the shares were 85 cents at the time.  I bought quite a lot at $1.02 in July last year so maybe the hounds timing isn't too bad.  That and they have done a lot to improve their business model over the last few years so I am comfortable with my timing...you can't have perfect timing on every stock you buy lol...$1.60 for plenty of Turners in April 2020 was what this hound would call 'purrfect" timing.

Possibly worth income investors noting that Forsyth Barr are forecasting 16 cps fully imputed this year, (gross yield at $1.47, a stunning 15.1%,) and this assumes full utilization of the $50 extreme event reserve.  This drops on their assumption of a more normal level of business as usual claims to a still very high 12.8% gross next year and 14.2% the year after that...all assuming full utilization of that reserve for all those years.

Divvy payout ratio is 60-80% where its prudent to do so, so there's potential for the divvies to be higher in favorable weather conditions that those of us that enjoy boats, absolutely love.

Anyway for the low PE doubters, Forbar projecting
FY25 eps 27.4 dps 16
FY26 eps 18 dps 13.5
FY27 eps 20 dps 15
Clearly they are forecasting a return to more normal weather patterns, if there is such a thing, in future years.
Target price is $1.71

[Left Field]

A picture is worth a thousand words, they say..... TWR has been a great performer for those who got on board in the 60c - 80c range just over 1 year ago.

SP still showing upwards potential $1.50 heading to $1.70 and beyond  (with the growing divvies icing on the cake!)