Tower says it may post an annual loss as challenges in New Zealand increase claim frequency and hurt profitability. 

The insurer is now forecasting underlying earnings to range between a loss of $NZ2 million ($1.85 million) and a profit of $NZ3 million ($2.77 million) in the year to September. 

Tower had been forecasting a profit of as much as $NZ13 million ($12.02 million) in May and $NZ26 million ($23.3 million) in October but now says inflation, car thefts, supply chain difficulties and extreme weather could wipe out earnings. 

Even after lifting motor insurance premiums by an average of 26% in the past year, its claims ratio excluding large events still deteriorated to 55% over the three months to June 30, from 52%.  

Costs from large events, including cyclones Judy and Kevin in Vanuatu, are now $NZ39.5 million ($36.5 million). Tower is forecasting GWP growth of 15-20%. 

The team is further tightening risk selection, automating claims management processes and working with suppliers to manage rising costs. Car theft has been addressed with higher premiums and raising the excess for models stolen more regularly. 

Tower reported an underlying loss of $NZ3.3 million ($3.1 million) including large events costs for the six months to March. Last year. Tower’s underlying net profit was $NZ27.3 million ($25.3 million).