Tower shakes up tech, pricing in search of rebound
New Zealand insurer Tower has forecast an earnings rebound this financial year as it makes technology and pricing changes and pursues a strategy to take on larger rivals.
“Tower holds a unique position in the New Zealand insurance market,” CEO Richard Harding said. “We have a solid existing customer base, yet plenty of room to continue growing and acquiring market share from the two large incumbents.
“Our desire to step outside the confines of a traditional insurer and our dynamic size means we can make decisions faster and capitalise on opportunities quicker and more efficiently than our competitors.”
Tower, New Zealand’s third-largest insurer, forecasts underlying profit after tax will rise to more than $NZ22 million ($20.7 million) this financial year after slumping 24% to $NZ13.6 million ($12.8 million) in the year to September 30 due to severe weather in New Zealand, Tonga and Fiji.
The insurer is investing in its own strategy after Suncorp’s acquisition bid was blocked by the competition regulator last year. Canadian insurer Fairfax also considered buying the group.
Mr Harding says the insurer is halfway through an IT overhaul that includes replacement of legacy systems, digital enhancement and product rationalisation.
It aims to move 50-70% of all transactions online as it repositions as a contemporary challenger brand, and it is reducing the number products in the New Zealand book from more than 400 to 12 core offerings.
Underwriting and pricing changes are also forecast to improve earnings, with Tower announcing in April a move to risk-based pricing for earthquakes.
“We continue to strongly believe that moving to risk-based pricing was the right decision and work has begun on risk-based pricing for flood, wind and storm,” Mr Harding said.
Tower has reported an overall loss of $NZ6.7 million ($6.3 million) for the financial year, compared with a $NZ8 million ($7.5 million) loss the previous year. Settlement of a dispute with Peak Re and more adjustments for the Christchurch quake hit the bottom line.
It reported 163 open Canterbury claims, down from 323 the previous year after it closed 318, reopened 43 and received 115 new properties.
Severe weather impacts before reinsurance totalled $NZ20.1 million ($18.9 million), compared with a five-year average of $NZ11.3 million ($10.6 million) and a 10-year average of $NZ7.6 million ($7.1 million).