TWR - Tower Insurance

[Dolcile]

So if we assume TWR report the mid point of the uNPAT guidance of $105m... how much do you think they'll pay out in dividends?

[Basil]

I'm hoping for a final divvy of approx 5 cps and a special divvy of 9 cps both fully imputed.

[Left Field]

A good summary of insurance claims following the October Otago/Southland extreme weather events.....

https://www.rnz.co.nz/news/business/579501/thousands-of-insurance-claims-lodged-as-result-of-wild-october-weather

Seems IAG & FMG going to be hit hardest sharing almost equally over 7000 claims, with TWR around 850 claims.

Phew.

[alkebab]

https://www.nzx.com/announcements/463466

16.5c dividends.

Basil, your estimate got smashed. LOL.

[Basil]

https://www.nzx.com/announcements/463466

16.5c dividends.

Basil, your estimate got smashed. LOL.

Yeah, I'm really upset about that ROFL
Tower reports record FY25 result, increased dividends

Kiwi insurer, Tower Limited (NZX/ASX: TWR) today announced a record underlying profit performance for the year ended 30 September 2025, delivering an underlying NPAT of $107.2m and a reported profit of $83.7m. The result was driven by low large events costs and a significantly reduced business-as-usual (BAU) claims ratio, alongside customer growth.

Reported profit reflects adjustments for increased Canterbury earthquake claims cost estimates, the ongoing cost of customer remediations and a provision for software impairment.

FY25 highlights:
• Underlying NPAT: $107.2m (up from $83.5m in FY24)
• Reported profit: $83.7m (up from $74.3m in FY24)
• Gross written premium (GWP): $600m, up 2%
• Customer numbers: 318,000 (up 4%)
• BAU claims ratio: 41% (improved from 48%)
• Combined operating ratio (COR): 74.1% (vs 79%)
• Management expense ratio (MER): steady at 31.4%

Reflecting the positive results, Tower's Board has declared a fully imputed final dividend of 16.5 cents per share. This brings total dividends for FY25 to 24.5 cents per share.
WOW !! 

[alkebab]

A good summary of insurance claims following the October Otago/Southland extreme weather events.....

https://www.rnz.co.nz/news/business/579501/thousands-of-insurance-claims-lodged-as-result-of-wild-october-weather

Seems IAG & FMG going to be hit hardest sharing almost equally over 7000 claims, with TWR around 850 claims.

Phew.

Those storms have an estimated cost of $4.5 million counting towards the FY26 large event allowance of what, $45 million. Ouch.

Let's see what they have planned going forward especially with details from the Westpac deal.

Edit: Are we due for another abnormally warm year again? I have to check, but is La Nina back again?

[Basil]

FY26 guidance is about 10% higher than last years guidance.
Quick back of the envelope calculations.
Mid point of official guidance for FY26 is $60m
Assume half the adverse event allowance is used, (almost goes without saying there are risks around assuming that) leaves another $22.5m (What am I basing this assumption on ?)  $4.5 cost incurred already and (from the presentation) South Island storm and  Large event claims costs of $7.2m well
below historical 10-year average of $15m) so $15m is the 10 year average utilization but they have incurred $4.5m already = $19.5m, so I'm fairly conservatively estimating they use $22.5m of that provision in FY26
Estimated profit $$82.5m on 345.2m shares = EPS of 23.9 cps.
So what is the case for investing in Tower for future income.?
Closing price yesterday $1.92
Invest before it goes ex divvy on 14 January 2026 and get 16.5 cps back gives net entry cost for FY26 and future years income of $1.755
$1.755 / 23.9 cps = PE of only 7.34 which seems far too cheap compared to its peers in Australia and considering the growth initiatives with the Westpac deal kicking in from July 2026 and the key advantage they have over their competitors which much superior risk analysis software.
https://api.nzx.com/public/announcement/463466/attachment/457750/463466-457750.pdf

What's the case for income then ?
Its anyone's guess really but maybe they can pay about 20 cps fully imputed in FY26, down from 24.5 cps in FY25, (a year of very low claims on the large events contingency)
20 cps fully imputed = 27.8 cps gross.  On a net purchase price of $1.755, that's a gross yield of 15.8%.  Oh my goodness, surely not...
https://api.nzx.com/public/announcement/463466/attachment/457747/463466-457747.pdf

Comparative PE's from average analyst forecast for FY26 off Market Screener
IAG 16.8
Suncorp 15.7
Obviously there's no imputation credits with investing in Australian insurance companies.

I think its fair to say Tower shareholders are well positioned.

[Shareguy]

Great result. Slight beat on Craig's uNPAT forecast of $105m against actual $107m

DPS forecast of 17 cps against actual 24.5 cps

FY26 guidance improved.

$2 here we come.......

Sector average PE 14.2 which would equate to $2.50 a share

[alkebab]

Just running numbers with next year's forecast, $55-65 million NPAT assuming all of the large event allowance was fully utilized.
$55 million gives us 9.6c-12.8c dividends at 60-80% payout
$60 million gives us 10.5c-14.0c
$65 million gives us 11.4c-15.2c

I'm going to go with a NPAT of 60 million and 12c dividends for starters.

[Left Field]

.....What's the case for income then ?
Its anyone's guess really but maybe they can pay about 20 cps fully imputed in FY26, down from 24.5 cps in FY25, (a year of very low claims on the large events contingency)
20 cps fully imputed = 27.8 cps gross.  On a net purchase price of $1.755, that's a gross yield of 15.8%.  Oh my goodness, surely not...
https://api.nzx.com/public/announcement/463466/attachment/457747/463466-457747.pdf

Comparative PE's from average analyst forecast for FY26 off Market Screener
IAG 16.8
Suncorp 15.7
Obviously there's no imputation credits with investing in Australian insurance companies.

I think its fair to say Tower shareholders are well positioned.

Great result..... well done holders!

Nice to see Basil getting excited 

[Poet]

Great result. Slight beat on Craig's uNPAT forecast of $105m against actual $107m

DPS forecast of 17 cps against actual 24.5 cps

FY26 guidance improved.

$2 here we come.......

Sector average PE 14.2 which would equate to $2.50 a share

If TWR traded at PE of 14.2 on Npat then share price would be $4.44

107/342 * 14.2

[Shareguy]

If TWR traded at PE of 14.2 on Npat then share price would be $4.44

107/342 * 14.2

Your correct. $2.50 is based on NPAT of $60m without the large events provisions.

[Basil]

Its clear they are growing and looking at the presentation they also have a goal for getting the management expense ration down to the 28-30% range by FY28.

I think its also clear they have some key competitive advantages over their competitors.  I see no logical reason why this can't grow over time to be trading on similar metrics to Suncorp, a PE of 15.7

If this happened based on my estimated EPS of (24 cps x 15.7) that's $3.77

Maybe a good one to have in the 2026 stock picking competition as well as plenty in your real portfolio ?

[Dolcile]

What a great result.  Very happy with the 16.5c dividend.

[Basil]

I topped up with a few more this morning.  I want to be super well positioned for that monster dividend feed on 29 January lol.