TWR - Tower Insurance

[Basil]

Today and tomorrow are your last chances to buy and get the fully imputed dividend of 8 cps on 26 June.  Trades ex divvy on Wednesday 11th. https://api.nzx.com/public/announcement/451862/attachment/443633/451862-443633.pdf

[Left Field]

Looks a good choice for the new CEO..... always good for continuity to promote talent from within.

https://www.nzx.com/announcements/453211

[Basil]

Paul's strategic and operational experience, together with his sharp focus on insurance profitability and adept navigation of recent complex and challenging market conditions positions him as the ideal candidate to drive Tower's continued success," he said.

Great move.  Results have been heaps better since he joined as CFO in January 2022.

[Basil]

Rawz - other channel.

Am I going crazy here? TWR trades on a PE of 6. Dividend yield of 11% and we have 3 months to go before EOFY when we are going to get another windfall payment if the large event allowance isnt used?
this is super cheap.
disc. holder

Screams cheap louder than a cage full of budgies.  Dividend payment date is 26 June.  D.I.Y dividend reinvestment program is a good idea in my opinion.

[LoungeLizard]

Expect a profit upgrade soon - to maybe around $90m plus any unused large claims fund, which could be substantial if Mother Nature continues to play ball. The SP is crazy low at the moment and one has to expect/hope it will surge on the next upgrade.

[lorraina]

I came across SDF in Aussie.PE ratio 28.08 yield 3.08%
Certainly makes TWR look cheap.
Steadfast Group Limited (SDF) provides services to steadfast Network brokers, distribution of insurance policies via insurance brokerages and underwriting agencies, and related services. The Group's corporate structure includes equity investments in insurance intermediary entities (insurance broking and underwriting agencies), premium funders and complementary businesses. They majorly operate in Australasia, with growing operations in Asia and Europe.

[Basil]

For those that don't know, IAG Australia (ticker code IAG) dominate the market here under various brands that give the illusion of competition.  https://en.wikipedia.org/wiki/IAG_New_Zealand  Its currently on a PE of 16.6.  Next biggest here is Suncorp, ticker code SUN and its on a PE of 15.3

Forsyth Barr have TWR on a normalized (assumes normal weather patterns and full utilization of FY26 large adverse event allowance), of 8.  They note this is at a 48% discount to its Australian peers and the average over the years is 25%.   Moving back to the average discount of 25% would see TWR on a normalized PE of 12 and implies 50% upside from here.

The PE is likely to be much lower this year thanks to benign weather conditions in the first half.  Forsyth Barr commented that on average only about 20% of extreme weather events happen in the second half and we're almost half way through the second half. 

It seems highly likely a substantial portion of the $50 extreme weather allowance will be paid out as a special dividend this year.  (Tower have commented in the call that unused extreme weather provision is likely to be paid out as a special divvy contemporaneously with the final divvy) 

[Dolcile]

It does feel really undervalued. In this cases I always question why, but in this case couldn't come up with anything? I guess just not fully appreciated by local investors. 

I would welcome any views on this.

[LoungeLizard]

It does feel really undervalued. In this cases I always question why, but in this case couldn't come up with anything? I guess just not fully appreciated by local investors. 

I would welcome any views on this.

The metrics are compelling but the SP will always lag behind the metrics as it reflects the risk of a catastrophic event over and above what Tower has provided for. And in that event Tower becomes a loss making/no dividend business for a few years at least. And the SP goes off the cliff. That risk factor - no matter how unlikely -  is always there, so very risk adverse investors (and I'd include my self in that category) will either give it a miss or have a small holding. I'm likely to take profits at some stage and move on, but not yet as I think TWR will have a stellar year and there a good chance of a special dividend.

[Basil]

The metrics are compelling but the SP will always lag behind the metrics as it reflects the risk of a catastrophic event over and above what Tower has provided for. And in that event Tower becomes a loss making/no dividend business for a few years at least. And the SP goes off the cliff. That risk factor - no matter how unlikely -  is always there, so very risk adverse investors (and I'd include my self in that category) will either give it a miss or have a small holding. I'm likely to take profits at some stage and move on, but not yet as I think TWR will have a stellar year and there a good chance of a special dividend.

From memory their reinsurance limit is now up to $875m so unless you're talking about another Christchurch earthquake type event...  I like the way the company has gone about things in terms of overall risk management and ensuring more accurate risk based pricing in recent years.

[LoungeLizard]

From memory their reinsurance limit is now up to $875m so unless you're talking about another Christchurch earthquake type event...  I like the way the company has gone about things in terms of overall risk management and ensuring more accurate risk based pricing in recent years.

Well, the alpine fault line is overdue in breaking, so that sort of thing, yes.

[BlackPeter]

From memory their reinsurance limit is now up to $875m so unless you're talking about another Christchurch earthquake type event...  I like the way the company has gone about things in terms of overall risk management and ensuring more accurate risk based pricing in recent years.

Lets face it, nobody knew about the Christchurch (or Rolleston / Darfield) fault, before it knocked at our doors (quite vehemently, may I say). Why would anybody think that this was the last fault, we didn't know about?

And yes, LL - good point re the Alpine fault.

Throw in an increasing supply of atmospheric rivers ... and insurance certainly will be an interesting industry in the years to come, but sure - if one wants to invest into it, why not picking a compnay which looks cheap based on PE.

Obviously - Towers history doesn't really look brilliant (check the last 10 years or so), but as we all know - any company with a lousy past must be a success story in the years to come!

[Dolcile]

Tower is ticking up nicely. The sell depth is very thin.

[Left Field]

Been a nice week for TWR holders

8c interim dividend in the bank

SP up 5% over the last 5 days and a big ex-div crossing of 1.1 mill shares today at $1.59

Prospects of a future cap return to s/holders improving by the day.

 

[LoungeLizard]

Pretty bad flooding in Nelson/Tasman with Auckland about to take a hit. As will Towers large event fund I expect.