New Zealand insurer Tower is prepared for claims from the Canterbury earthquakes to exceed its estimates after it reported a net loss of $NZ6.6 million ($5.97 million) for the year to September 30.

This compares with a profit of $NZ23.6 million ($21.4 million) the previous year.

Increased earthquake provisions of $NZ53.2 million ($48.2 million) in the second-half are to blame for the loss, having a $NZ36.2 million ($32.8 million) impact on post-tax earnings.

Tower has estimated gross incurred claims of $NZ792 million ($717.8 million) for four quakes in September 2010 and February, June and December 2011, up from the $NZ706.9 million ($640.6 million) estimated on September 30 the previous year.

The February 2011 quake was the “most significant”, with estimated incurred claims of $NZ446.9 million ($405 million), and provisions raised by $NZ88.7 million ($80.3 million) during the year.

Tower says it “has exceeded [the] catastrophe reinsurance and adverse development cover limits in relation to the February 2011 event”.

“The February 2011 earthquake event provision affects our profit, given it is the only of the four events to exceed the reinsurance cap. Given the nature of estimation uncertainties… actual claims experience may still deviate, perhaps substantially, from the gross outstanding claims liabilities [as of September 30].”

The insurer had about $NZ206.8 million ($187.4 million) in outstanding claims liabilities at the end of the year.

At September 30 it had settled 96% of Canterbury claims by number and 88% by value.

Overall, gross written premium gained 2.7% in the year to $NZ305.6 million ($277 million).

Tower paid out claims of $NZ299.6 million ($271.5 million), down from $NZ383 million ($347.1 million), and the combined operating ratio improved to 89.6% from 91.6%.

“Despite the increased provisions for Canterbury claims cost, our underlying results were very good and reflect the potential of the general insurance business,” Chairman Michael Stiassny said.

Tower has $NZ73 million ($66.1 million) in capital above target solvency levels and holds a 4.7% share of the New Zealand general insurance market, making it the fourth-biggest group.