New Zealand insurer Tower says its general insurance underlying net profit grew 36.4% to $NZ17.9 million ($16.8 million) in the six months to March 31.

But the result is soured by a net loss of $NZ4.9 million ($4.6 million) when increased provisions of $NZ22.6 million ($21.2 million) for the Canterbury earthquakes are factored in.

General insurance gross written premium was $NZ145.9 million ($136.6 million) in the half, up 4.9% on the previous corresponding period.

Chairman Michael Stiassny says the underlying result reflects a market characterised by rising premiums, stabilising reinsurance costs and fewer large weather-related claims.

He says the insurer, which has a dual listing on the New Zealand and Australian stock exchanges, will soon start its on-market share buyback of up to $NZ34 million ($31.9 million), or up to 10% of Tower’s issued capital. 

CEO David Hancock says Tower has made “significant progress” implementing its growth strategy in New Zealand and the Pacific, “transforming our customer interactions to drive revenue and efficiency, building our digital capability to take us into new distribution channels and increasing our very strong position in the Pacific Rim”.

The Pacific Rim business enjoyed strong earnings growth in the half, with policy numbers up 7.7%. The region represents more than 25% of Tower’s revenues and earnings.

Mr Hancock says it offers further opportunities as Tower prepares to enter the Vanuatu market.

Tower has made further progress on Canterbury claims, with 94% settled and closed at April 30, up from 81% at March 31 last year.

Meanwhile, the group has announced the appointment of Melbourne-based Warren Lee as a non-executive director. Mr Lee is Victorian Funds Management Corporation CEO and a former CEO of Axa Asia-Pacific.

Research house Morningstar says Tower is a leaner “pure general insurance company”, since divesting its health and life insurance businesses, but is “still relatively small” with 5% market share in New Zealand.

Although anticipating Tower will have some success with new products, product-bundling and new distribution channels, Morningstar warns of a competitive market and the ongoing commoditisation of general insurance products.

It has placed a “reduce” recommendation on the stock.