Tower Ltd has posted a profit of $NZ33.4 million ($25 million) for the year to September 30, down 43% due to the Christchurch earthquakes and lower investment earnings.

MD Rob Flannagan described the result as “a satisfactory performance” given the earthquakes.

“The Christchurch earthquakes and the global financial crisis created a difficult operating environment during the reporting period but I am pleased to say that this result demonstrates that Tower has come through these challenges very well, supported by solid performances across each of Tower’s business sectors,” he said.

Mr Flannagan told insuranceNEWS.com.au that the present financial year will be challenging as the market adapts to the changes brought about by the earthquakes and financial crisis.

Tower raised its premiums by an average 25% in August, and he says the reaction so far has been positive because the entire market has moved in the same direction and New Zealanders understand the need for insurance cover.

Whether the increases continue will depend on the December reinsurance treaty renewals and the impact of the European debt crises on reinsurers, he said.

Tower incurred $NZ450 million ($343 million) of earthquake claims but reinsurers bore most of the loss, with the company posting an earthquake loss of $NZ23.6 million ($18 million).

Tower has previously signalled its interest in troubled Christchurch mutual insurer AMI, and Mr Flannagan says the company is also looking at the general insurance and motor book of Ansvar, which announced last week it would cancel all policies on December 31.

The company’s gross premium revenue rose 3% to $NZ438 million ($334 million), but total revenue fell 11% to $NZ540 million ($412 million) on lower investment earnings.

Claims expense doubled to $NZ696 million ($531 million) but after reinsurance recoveries of $NZ417 million ($318 million) the net claims expense was steady at $NZ278 million ($212 million).

The reinsurance expense rose 53% to $NZ61 million ($46 million) mostly due to reinstatements.

Mr Flannagan says that when earthquake costs are excluded, Tower’s profit was $NZ54.6 million ($42 million) – down 6% due to lower investment earnings.