Tower has lowered its earnings guidance for this year due to an increase in large house claims, building inflationary pressures and reduced investment income.

The company expects underlying net profit of $NZ25-27 million ($23-25 million) for the year ending September 30, compared with previous guidance for profit of more than $NZ29.8 million ($27.7 million).

Tower accepted 52 large house claims totalling $NZ9 million ($8 million) in the first half, compared to 26 claims worth $NZ4.9 million ($4.6 million) in the previous corresponding period, while the low interest rate environment reduced investment income to $NZ600,000 ($558,707) compared with $NZ2.2 million ($2.0 million).

CEO Blair Turnbull says the company has started an accelerated assessment of the claims experience to determine adjustments to processes and pricing.

“While there is always volatility in claims, we recognise that these emerging external pressures need to be quickly addressed,” he said “The company intends to act decisively to adopt new approaches to manage this risk and strengthen our position.”

Mr Turnbull says the firm is also working with its supply chain to moderate cost increases.

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

Tower flagged that there could be an increase in reinsurance costs this year, following a review of its program, but any change would not affect the guidance.

The company will release its interim result on Wednesday next week.