New Zealand insurer Tower has reported weaker first-half earnings, with profit after tax falling to $NZ12 million ($11.3 million) for the six months to March 31 from $NZ14.9 million ($14 million) in the corresponding period of last year.

Underlying net profit, excluding large events, declined 5% to $NZ18 million ($16.9 million).

The insurer says claims from large events such as the Ohau fire, increased house claim costs, rising building costs and lower investment income blunted the growth in premium and reduction in management expenses.

Large events had a $NZ9.3 million ($8.7 million) impact on pre-tax earnings, up $NZ2.8 million ($2.6 million) from a year earlier.

The business had 52 large house claims totalling $NZ9 million during the period. In the year earlier period, it received 26 large house claims costing $NZ4.9 million. A house claim of $NZ50,000 and above is defined large.

At the same time the average cost for a house claim has gone up to $NZ4620 ($4339), an increase of 8%.

Tower says it is taking decisive action to tackle the claims challenges. These include reviewing pricing and underwriting policies and working with data science partners and multiple stakeholders to analyse risks.

“We have commenced a review of our FY21 claims experience and will also work with our supply chain to realise efficiencies and manage increases in claims costs,” CEO Brian Turnbull said.

“These actions will take time to gain traction, however we expect to begin realising benefits in the second half.”

Gross written premium rose 6% to $NZ194 million ($182 million) and the management expense ratio improved to 36.5% from 39%.

Tower is keeping its full-year earnings guidance, forecasting underlying net profit after tax of NZ$$25-27 million ($23.4-25.4 million) for the 12 months to September 30. The forecast assumes large events of $NZ9.7 million ($9.1 million).